Oil Search Limited released a statement today in response to media coverage on its technical and financial assistance towards Puma Energy Limited. Puma Energy, a majority-owned down-streaming Oil company between Singaporean Trafigura and the Angolan Sonangol Group. The company operates supplying, storing, refining, distributing, and retails a range of petroleum products. It is based in over 47 countries and across 5 different continents.
Read the full statement below:
Oil is a global commodity which is shipped all around the world. Since the 1970s, the US dollar has been the only currency used for trading in oil in the international markets.
Oil Search sells ‘Kutubu Blend’, comprising a blend of oil from the oil fields in the Southern Highlands and condensate from the PNG LNG Project, on behalf of 22 joint venture partners, including Kumul Petroleum and MRDC.
Kutubu Blend is sold to a range of customers in the Asia Pacific region, with all sales denominated in US dollars. ExxonMobil separately markets and sells its share of Kutubu Blend cargoes in US dollars.
Over the past 12 months, six cargoes of Kutubu Blend have been sold, in US dollars, to Puma’s 49% shareholder, Trafigura, one of the world’s leading oil trading companies. Trafigura has then on-sold these cargoes to Puma, also in US dollars, for use at the Napa Napa refinery. Oil Search does not sell oil directly to Puma in Kina, as this is not permitted under legally enforceable obligations to lenders and partners.
Like other PNG LNG Project participants, Oil Search is required by the lenders to the Project to sell oil to customers only in US dollars. The customers must also pay the consideration for these cargoes into US dollar bank accounts controlled by the lenders. Oil Search’s corporate bank lenders impose the same requirements for crude proceeds. These arrangements are standard for major resource project financings.
Recognising the present shortage of foreign currency in the PNG economy, Oil Search has been working constructively with the PNG Government, the Treasurer, Trafigura and Puma to identify commercial solutions that can address some of these challenges. Oil Search has indicated it is willing to assist Puma in addressing its US dollar needs, while still complying with its lender undertakings and the requirements of its joint venture partners for US dollar oil sales on competitive terms.
Specifically, provided that Trafigura continues to purchase cargoes from the Oil Search marketing consortium in US dollars on a competitive basis, Oil Search, in its own name, intends to repurchase cargoes and on-sell them to Puma in Kina, with the number of cargoes representing a significant proportion of the refinery’s needs. This flexibility and willingness by Oil Search to support the country’s major refiner is testament to the good working relationship that Oil Search has with the Government and other key industry players.
We believe these arrangements, which do not breach our other legal obligations, could result in the reduction of costs to Puma and hence some relief from certain charges relating to access to foreign currency for Puma’s customers.
Oil Search is PNG’s largest investor and has spent some K24 billion (US$9.5 billion) on exploration, appraisal and development activities in-country over the past decade. The Company is also one of the biggest suppliers of foreign currency into PNG. On an annual basis, we contribute approximately US$240 million in exchange for K800 million. We fully comply with the Central Bank’s foreign exchange regulations and with the relevant oil and gas legislation regarding oil exports and sales to domestic buyers.
As a proud Papua New Guinean company, Oil Search is also one of the country’s largest employers and works in partnership with government and stakeholders to create better and sustainable development outcomes for all Papua New Guineans. This is achieved by building capacity, strengthening relationships and leveraging resources to improve service delivery in PNG, particularly in the areas of health, power, infrastructure development, women’s protection and empowerment and leadership and education.