- Port Moresby
- Posted 30th Jul, 2019
No proposed secret meeting with PAC
The Board Chairman of Kumul Petroleum Holdings Limited (KPHL), Mr Andrew Baing, says there was no proposed secret meeting with Sir John Pundari, the Chairman of Permanent Parliamentary Committee on Public Accounts (PAC) or his Committee.
Responding to Sir John’s statement in the media where he continues to insist that KPHL submit its financial reports and business dealings and information of PNGLNG Project to the PAC, Mr Baing, said, “on record, neither I as the Chairman of Kumul Petroleum Board nor the management have suggested for any such meeting behind closed doors with Sir John or his PAC members.”
He said “KPHL has received written correspondences from PAC to which we have responded in writing and made our position clear and will continue do so, that KPHL is a Government Business governed by its own legislation and does not get budget support from the National Budget, as such is not subjected to the Public Finances (Management) Act and therefore does not come within the ambit of the PAC.”
He stressed that “this is not a smokescreen cooked-up yesterday by KPHL to cover itself from public scrutiny but it is the Process where KPHL follows and has two separate reporting mandate.” Firstly, KPHL reports through the Prime Minister who is the Trustee and shareholder on behalf of the 8 million people of PNG, therefore all reports (Annual Reports, Operating Plans, etc) are given to NEC and his office. Secondly, KPHL is a company and operating under the Companies Act, hence our finances and corporate compliance matters are fully audited by the office of the Auditor General which has contracted Ernst & Young (EY) and Deloitte for Audit and Financial compliance from 2010 to 2018. From 2019 onwards, the office of Auditor General has selected PWC to audit KPHL.
If Sir John or the PAC wants to know about KPHL Operations, initial request should have been to the office of the Prime Minister or the Auditor General’s office instead of going to the media and running a media trial. This media trial is damaging to our National Oil and Gas Company which has a huge responsibility to fulfil its ongoing obligations in existing oil and gas projects as well as new Projects coming up in this country.”
He said “when KPHL was established, the aim of the State was to create a corporate institution capable of commercial operation and profitability as any other privately owned commercial entity, taking into consideration the lessons and principles that created some of today’s powerful NOC’s like Malaysia’s Petronas, Indonesia’s Pertamina and Brazil’s Petrobras.
He said “the State intentionally excluded the application of the Public Finances (Management) Act on KPHL as part of this thinking and more particularly because of the following critical commercial considerations: (1) to enable KPHL to become financially independent so that KPHL does not run to Treasury to seek funds for its investment and operational requirements, (2) to ensure that the State’s liabilities and loan obligations do not affect KPHL’s ability to finance its investments and operations, and (3) conversely that KPHL’s liabilities and obligations do not affect or limit the State’s ability to raise external funding as and when the economy dictates, and (4) more importantly to limit political interference in the commercial operation of KPHL”.
He added that “KPHL’s mandate as PNG’s NOC and its governance and reporting requirements were established through the Kumul Petroleum Holdings Limited Authorisation Act 2015 (KPHL Act) and further strengthened by section 212B of the Constitution of PNG and relevant provisions of the Organic Law on Papua New Guinea’s Ownership of Hydrocarbons & Minerals and the Consolidation and Commercialization of Papua New Guinea’s Business Law 2016.”
Mr Baing clarified, however, that “this does not mean KPHL operates in an untouchable ‘glass house’ but that KPHL is by law accountable to its ultimate shareholder, being the people of PNG, and that KPHL continues to discharge that obligation through the following legislated avenues:
- Firstly, KPHL incurs expenses and carries on business (including any borrowings) only in accordance with its Annual Operating Plan which must be considered and approved by the National Executive Council (NEC).
- Secondly, KPHL’s books are audited by one of the Big 4 international accounting firms. These firms are engaged through the Auditor General’s Office (AG). The AGO maintains oversight of the audit process and when the audit is completed to his satisfaction, he signs-off on it. Hence since 2010 till 2018, Deloitte and then Ernst & Young, working through the AGO, have produced “unqualified audit reports” for KPHL which is an unprecedented feat for any of the State Owned Enterprises.
- The Third Avenue for accountability is through the Prime Minister who is the sole shareholder of KPHL as a trustee for the people of PNG”.
The Chairman stressed that while the PAC is an important institution of the country, the NEC, the AGO and the Prime Minister are also Constitutionally established institutions of the country mandated to represent the people of Papua New Guinea in their various roles and responsibilities and must be respected and not undermined.
The Chairman said KPHL has already engaged with the PAC by responding in writing to PAC’s request and will continue to engage in that manner. He said he saw no need to continue this conversation in the public media and that this would be his last release on this subject matter
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