Isaac Lupari’s Papua LNG fiction, and the record that should have kept him out of KPHL.

by PAUL L. KEBAIJA

Isaac Lupari says the State's stake in Papua LNG will not cost the National Budget a toea. In a statement reported by EMTV on 1 November, the Kumul Petroleum Holdings (KPHL) chairman said the State's 22.5 per cent share, worth US$1.1 billion, will come from a US$300 million loan arranged by BSP and US$800 million of KPHL's earnings from PNG LNG between 2026 and 2032. He also warned leaders to be careful what they say in public, because wrong information scares investors.

The budget claim does not survive Treasury's own numbers. KPHL belongs to the State, so every kina it keeps is a kina it does not pay Treasury as a dividend. The Treasurer's mid-year outlook, dated 31 August, recorded a K2.4 billion deficit at the half-year mark against K1.6 billion forecast for all of 2026. Treasury expects at least K1,666.7 million in KPHL dividends this year and complained that the Kumul offer was just K650 million. It argues higher oil prices allow both the dividends and the equity plan. Maybe so, but the money comes from the same pool. The US$800 million Lupari is ring-fencing is budget money under another label.

That money is not in the bank either. Lupari concedes it "will be generated over that period": seven years of LNG sales, exposed to prices nobody in Port Moresby controls. Cash calls land during a four-to-five-year build. KPHL says it holds US$180 million for the first one. Whatever falls between bills due and income earned will be met by more borrowing or thinner dividends.

US$1.1 billion is not the State's full exposure. TotalEnergies put Papua LNG's capital cost at about US$14 billion in September. A 22.5 per cent share of that is roughly US$3.15 billion. Lupari says his package covers equity only, which leaves around US$2 billion to be borrowed against the State's share through project finance. By early 2025, at least 13 banks and export credit agencies had said they would not lend to Papua LNG. IMF staff have since proposed excluding "expected official guarantees" for the project from PNG's external debt ceiling. Guarantees are State liabilities in waiting. Lupari's assurance that the plan respects World Bank borrowing rules points at the wrong institution: PNG's binding debt limits sit in its IMF programme.

Lupari is no petroleum professional. He is the great survivor of PNG's public service: Finance secretary, ambassador to the EU, twice chief secretary, chief of staff to Peter O'Neill, and since May, KPHL chairman. The Commission of Inquiry into the Department of Finance, which reported in 2009, examined about K3.7 million in claims he lodged through Paraka Lawyers over four government contracts. It found he suffered no loss, called the claims "triple and quadruple dipping", and recommended his referral to the Fraud Squad and the Ombudsman Commission. At least K1 million was paid out. No charges followed, as far as the public record shows.

In 2019 the Ombudsman Commission's UBS loan report found his conduct in conveying the 2014 Cabinet decision to buy Oil Search shares "wrong and improper" and recommended him for a Leadership Tribunal. Also named for referral was James Marape, the Prime Minister Lupari thanked in Sunday's statement. While chief secretary, Lupari also chaired Dirio Gas and Power, an independent producer selling electricity into PNG Power's grid.

None of these findings has been tested in court, and Lupari is entitled to that. There is also a respectable case for State equity: PNG LNG's project debt was retired early, and KPHL's stake now pays cash. That case needs honest numbers. A country that has lived through the UBS loan, the Kroton equity fight and a year of court battles over KPHL's own board deserves more than a press statement. In May, KPHL was celebrating a clean audit, for 2022.

The fix is disclosure. Publish the financing plan Cabinet approved. Publish the BSP facility: rate, tenor, security and which banks are in it. Publish the cash-call schedule beside projected PNG LNG income and the dividends Treasury is counting on. Tell Parliament, before FID, what guarantees the State will give. Until then, Lupari's warning about wrong information is best directed at his own statement.