When you’re handed a lemon – make lemonade. The PNG Oil Search shares saga.

By PNG Echo.

Prime Minister, Peter O’Neill has defended his government’s position on the controversial UBS loan in the wake of an article published by Fairfax Media saying:

The cost of losses we suffered to the Arabs are far worse than the cost we pay on the loan from UBS.”

He went on to explain:

PNG paid $8.20 when the Somare government agreed to pay $8.50 to the Arabs, Oil Search is our country’s biggest tax payer and one of the largest employers of our citizens so why is it wrong for us to be a stable shareholder in that company?

In reality, this is a question that only time will answer – but the other often overlooked reality is that it was a decision that was forced upon the Prime Minister by the actions of a previous government – that of the Somare government and its Minister Arthur Somare and the disastrous deal with Arab money.

While it is true that there was more than one solution to the situation forced upon this government, it is also true that given the current state of the market, it is moot whether any alternative would have yielded a better result.

The Deal

Reading the information provided in the aforementioned article (written by John Garnaut – son of Ross Garnaut an erstwhile Chairman of the PNGSDP and someone that the Prime Minister declared “unwelcome” to return to PNG) the deal has its weaknesses but it also has its strengths.

Being given that its weaknesses have already been amply explored and exaggerated  – let’s now consider it’s strengths.

Garnaut describes a situation whereby 20-30 of the best financial minds worked 24/7 for two weeks to create a deal that was a win-win-win situation: for PNG, for Oil Search and for UBS.   It was acknowledged that no one else could have offered PNG a deal on better terms than UBS.

And sometimes even the perceived “weaknesses” turned out to be strengths when the much criticised ‘collar arrangement’ according to Garnaut:

… rescued the PNG government from the full force of the unexpected fall in prices for oil, gas and Oil Search. A plain vanilla loan would have left them in worse shape.

A UBS spokeswoman explained:

Given the recent weakness in the oil price, this protection has clearly been shown to be valuable for the PNG government.

The Lawyers get involved

It is difficult to discern, from the article, whether Garnaut is suggesting the UBS loan is a sweetheart deal for the bank to the detriment of PNG or whether he’s saying the opposite.

He quotes Robert Wyld, co-chair of the International Bar Association who questions why UBS would contemplate such a deal, saying:

Where is the commercial logic? You would think that anybody at the highest levels at UBS would have known they were dealing with an incredibly high-risk government with an incredibly high-risk prime minister.

But while the International Bar Association may have this poor opinion of dealing with Papua New Guinea, conversely, the Australian Bar Association was at odds to make sure its members are able to continue to tap this lucrative market – and when lawyers Greg Egan and Terry Lambert were banned from entering the country because of alleged visa irregularities, they had this to say:

Foreign counsels play an important role in the administration of justice in PNG and lawyers must be allowed to practise without intimidation. This includes the right of entry into the country.

It’s clear to see where the “commercial logic” is there.

Australian interests:

That this issue has received so many column inches in Australian newspapers, newspapers that are routinely uninterested in matters to do with the Papua New Guinea, is summed up by two sentences of Garnaut’s:

UBS struck a massively controversial deal to land the PNG government with a 10 per cent stake in ASX and PNG-listed company Oil Search. Those shares are seen now as an effective blocking stake to Woodside’s ambitions to buy Oil Search, in one of the biggest deals currently in play.

The deal has established Papua New Guinea as a major corporate player in the Australian Market.

It’s to do with Australian corporate profits and the thwarted Woodside attempted takeover of Oil Search. It is well-recognised that Papua New Guinea could be a considerable deal breaker here even though the Prime Minister has indicated that he will consider the proposals on their merit and will not arbitrarily block any well-negotiated and reasonable deal.

Hail the lukewarm patriots

Nevertheless, what is surprising about the commentary I have read on Garnaut’s article is that the PNG commentators have chosen to accentuate and accept all that is negative in this report while ignoring the positive. No one has asked why Australia is all of a sudden so interested in PNG politics or why it is this particular deal on which they’re focussed? Everyone has just accepted the Australian line.

Some PNG commentators (of the noisier variety) have employed wildly defamatory and unsubstantiated accusations against both Prime Minister Peter O’Neill and Oil Search’s Peter Botten that involve alleged massive kickbacks and insider trading. This is almost as unconscionable as their resort to racism and Prime Minister O’Neill’s Irish heritage.

Think about it PNG – this is all smacks of Australian vested interest.

Collectively, Australians will always have the welfare of Australia prominent in their psyches and in their actions. They don’t want PNG to impact on Australian corporate deals while being very willing to take advantage of the lucrative market for Australians in PNG – like visiting lawyers.

And don’t get me started on the article that warns that tribal chiefs are threatening civil war over the UBS loan – just like on Bougainville. There are so many gaps in the argument that this is a similar situation to Bougainville that whole national parks can be ranged in those gaps.

The whole article is exploitative, irresponsible and screams “vested interests”.
But ultimately, what’s completely risible about the situation is that:

…the land owner claims are being supported by Arthur Somare, who led the 2009 negotiations, and who is the son of Sir Michael Somare, who recently referred Mr O’Neill to a leadership misconduct tribunal.

Arthur Somare is also the man who struck the deal with Arabs that led to the situation and the decision to do the deal with UBS that the landowners are railing against.

In a similar irony, Sir Michael Somare  who was Prime Minister in the government that set up the original loan under son and Government Minister Arthur and who has recently resigned from the party he formed – the National Alliance (after being asked to step down) has come out saying:

We are calling on our Prime Minister Peter O’Neill to explain to the nation why he has saddled Papua New Guinea with a huge financial burden with the UBS-Oil Search loan which is aggravating the government in simmering fiscal crisis.

Do neither of the Somare’s recognise the irony of their positions, not to mention the sheer bloody hypocrisy?