Konebada Petroleum Park controversies pile up

Petroleum Parks Holdings Limited

Petroleum Parks Holdings Limited [PPHL] was registered in Papua New Guinea during June 2016, with Donald Valu and Joel Oli as the directors and shareholders.

Valu is the CEO for Konebada Petroleum Park Authority and Oli was, at the time PPHL was registered, the KPPA Managing Director.

_{Network Map: PPHL shareholding at registration}

PPHL appears to operate as a ‘subsidiary’or ‘linked’ company of the KPPA, as was revealed in an earlier PNGi investigation.

PPHL has recently had various dealings with a number of private companies, including Pacific (PNG) Oil & Gas Limited; Bismarck Oil Company Limited; and Regional Resources PNG Limited.

Each of those dealings raises various important governance questions; but what exactly is the relationship between KPPA and PPHL?

Trustees or not?

Petroleum Parks Holdings Limited is a private company registered with the Investment Promotion Authority. The company has two directors who are also the only shareholders.

The application to register the company was made by HLB Business Solutions Ltd. The application was signed by Donald Valu. Donald Valu and Joel Oli also each signed forms signalling their consent to being both directors and shareholders in the new company. Three forms, five signatures, eleven pages, but nowhere is there any indication that Valu and Oli were acting other than as  private citizens, registering their own company for private business purposes.

This apparent private ownership of the company, is also reflected in the current company extract that can be accessed from the Investment Promotion Authority [a copy can be viewed below]. The extract shows PPHL is a company registered in June 2016. Its registered address is at the offices of HLB Business Solutions. It has two directors, Samuel Pepena and Donald Valu who give their private addresses in Gerehu and the Rainbow Estate. The same two gentlemen are also the shareholders in the company, each holding one share.

To anyone doing an investigation or due diligence, another company, a banker, a stockbroker, a journalist or a public official, PPHL looks like a privately owned company not a State asset.

One has to to dig deep to find any suggestion this might not be the case. It is only on two company forms, signed and submitted to the Registrar of Companies in February 2017, that we see any suggestion of the connection to KPPA and the use of the word trustee. On the Notice of Change of Shareholder form, submitted to transfer the share originally held by Joel Oli to Samuel Pepena, the words ‘intrust for Konebada Petroleum Parks Authority’ have been inserted below the name of Samuel Pepena (in a different pen).

Similarly, on the Change of Director form, the words ‘intrust for Konebada Petroleum Parks Authority’ have been added below the details of Donald Valu, although no such annotation appears under the details for Samuel Pepena on the same form.

Another clue as to a possible relationship between KPPA and PPHL is found in a PPHL Board Meeting Minute and Company Resolution dated 3 February 2017 . That document reveals the PPHL Board meeting was held in the KPPA Board room with only one non-KPPA staff or Board member present.

That meeting approved the removal of Joel Oli as a director and shareholder of PPHL and approved the appointment of Samuel Pepena.

As well as establishing the prima facia link between KPPA and KPHL, the minutes disclose a rather disconcerting fact: there is no evidence in the meeting minutes, or relevant corporate disclosure documents, that anyone outside KPPA was involved in the decision to appoint Samuel Pepena as a shareholder and director of KPHL or that there was any open or transparent selection process. There is no indication even of who proposed Pepena for the roles or who invited him to be present at the Board meeting.

Samuel Pepena

Regardless of who proposed Samuel Pepena for his role as a shareholder and director for PPHL and the selection process, Pepena was an interesting choice given his background.

In the late 1990’s, Pepena ran, what he himself describes as, a ‘pyramid’ investment scheme that ‘was a disaster due to extreme external market factors’. The investors lost their money, amounting, according to Pepena, to several million Kina. At that time there were a number of such investment schemes being run in PNG, including ‘Money Rain’ and ‘U Vistract’ (in which, according to media reports, investors lost K4-6 million and K581 million respectively)._[1]

Sam Pepena also previously worked for a company, Global Transfers Limited, at a time when it was involved in the contentious acquisition of a parcel of land along the Poreporena Freeway in Port Moresby. _[2] The Public Accounts Committee declared the issuing of a licence over the land to Global Transfers to be ‘unlawful’ and said an application for planning consent should not be considered.

Pepena has also been accused, by his estranged wife, of abducting their three children and taking them to Fiji for over a year.

However, at present these are allegations made by public authorities, and affiliates of Pepena. There is no evidence on the public record proving  wrongful conduct in relation to either the Global Transfer land matter or the removal of his children to Fiji for a period.

_{FOOTNOTES
[1] ‘Millions lost in PNG scam’. Courier Mail, 20 September 2000.
[2] ‘Company clears air over land title’. Post Courier, 7 October 2011}

PPHL Hong Kong

Petroleum Parks Holdings Limited is not only a registered company in Papua New Guinea. Another company with the same name, Petroleum Parks Holdings Limited, exists in Hong Kong. The Hong Kong company was first registered in November 2013.

Mr Pepena has claimed the Hong Kong company was set up by him in his role ‘as MD of KPPA’ to attract investment from overseas into PNG’s resource sector. The November 2013 date of the Hong Kong registration though does not seem to confirm that story, as it precedes the registration of PPHL in PNG by almost three years and Pepena was only appointed to the Board of PPHL in February 2017. However, when one digs deeper, we find PPHL in Hong Kong was originally registered as Hong Kong Caring Wind Company Limited and only changed its name in December 2016.

What is far more interesting though is the ownership and Board of Directors of the PPHL registered in Hong Kong.

That company is not owned by KPPA or by the PPHL registered in PNG. The PPHL registered in Hong Kong is owned by a Hong Kong resident, Christine Sau Ying Yuen.

The directors of the PPHL registered in Hong Kong are Christine S. Y. Yuen, Donald Valu, Sam Pepena, former Minister for Justice and Attorney General, Ano Pala and private lawyer and businessman, Peter Pena.

Two things about this Board are particularly notable. Firstly, Sam Pepena is listed by the Authorities in Hong Kong as a Fijian national holding a Fijian passport number ‘970223’. If that is true, it could have very serious consequences for Mr Pepena’s Papua New Guinean citizenship as, until the recent Dual Citizenship law is fully implemented, it would mean Mr Pepena has relinquished his PNG citizenship and could be in the country illegally. Equally, if it is not true that Mr Pepena holds a Fijian passport and that information on the Hong Kong records is false, Mr Pepena could be guilty of a false declaration.

The other thing that is particularly notable about the Board is that in June 2017, both Mr Pepena and Mr Valu were granted ‘Permanent Directorships for life’ via an amendment to the company’s Articles of Association. This is revealed in a Special Resolution passed by the company’s shareholder at an Extraordinary General Meeting, a copy of which has been obtained by PNGi.

Pacific Oil and Gas Limited

Pacific (PNG) Oil & Gas Limited [POGL] is a company registered in June 2014 by Able (Abel) Wain. At that time he owned all the 100 shares in the company.

In November 2016, POGL issued 200 new shares to PPHL and 100 shares to Pertusio Capital Partners Limited.

At the time, the sole Director of POGL was not Able Wain, but the Australian, Gudmundur Fridriksson. He had replaced Wain as the sole director in October 2014 and continued on the board until April 2017.

In December 2016, Fridriksson was joined on the board of POGL by Samuel Pepena and Donald Valu, presumably representing PPHL, and the two owners of Pertusio, Lars Mortensen and Nathan Chang.

In its most recent Annual Return, for 2015, signed by Fridriksson, POGL had no declared assets or liabilities.

There is no indication in the public records as to why Able Wain decided to give away, apparently for no consideration, 75% of his company to PPHL and Pertusio in November 2016. In the company resolution recording the Board decision [effectively Fridriksson’s decision as he was the only Director] to issue the shares, there is no mention of any monies payable, other consideration or any other benefit to the existing shareholder [Wain] from the share issue.

In May 2017, six months after acquiring its shares in POGL, PPHL resolved to sell 80% of its interest (160 shares) to Pertusio Advisors Limited (which is owned by Pertusio Capital Partners Limited). The sale price was K5 million, with K500,000 to be paid immediately, a further K1.5 million within 30 days and the balance (plus interest) over the next 10 years.

This transaction, which involved 40% of the total shares in POGL, valued the whole company at K12.5 million. Remember, this is a business which only 18 months earlier, had no staff, no assets and no liabilities.

In August 2017, PPHL transferred its remaining 40 shares in POGL to Pertusio Advisors Limited.

There are no details recorded of the sale price for these further shares but the earlier sale would indicate a value of at least K1.25 million

Donald Valu ceased to be a director on the Board of POGL in June 2017.

Was the sale of the interest in POGL approved by the KPPA Board? If it was, what was the advice and strategy behind the sale? What has happened to the sale proceeds?

Bismarck Oil Company Limited

Bismarck Oil Company Limited [BOCL] was registered as a company in August 2011, by Ralph Saulep. The company had two shareholders, Saulep (8,500 shares) and Francis Wassaw (1,500 shares). They were also the sole directors.

In August 2015, the first board for KPPA was sworn in with Roha Kevau as Chairman, Ralph Saulep as Deputy Chairman and Sisia Morea as Director:

In November 2016, Saulep and Wassaw resolved to sell their shares in BOCL to PPHL with ‘the consideration of the shares to be left to the two gentlemen to negotiate and determine with the Transferee’.

The share transfer form lodged with the IPA suggests the shares were sold for K10,000, their face value. But that cannot be confirmed.

At the same time the shares were transferred, Saulep and Wassaw resigned from the Board of BOCL and were replaced by Donald Velu and Samuel Pepena.

It is not known what role, if any, Ralph Saulep, as Deputy Chair of KPPA played in negotiating the deal for the KPPA company PPHL to buy his company BOCL, but there was a clear conflict of interest situation that demanded careful handling.

Was the purchase of BOCL approved by the Board of KPPA? If it was, on what basis and with what independent advice? How was the price to be paid determined, given BOCL has no declared assets and has, in six years, never filed an annual return?

It should also be noted, Sam Pepena has publicly denied an accusation that “PPH paid K400,00 to register 2 Petroleum Prospecting licenses for their friend’s company called “Bismarck”. Pepena has described this as ‘utter rubbish’.

Regional Resources PNG Limited

In the same month as the BOCL purchase, November 2016, Donald Velu and Samuel Pepena were also appointed to the Board of another company, Regional Resources PNG Limited [RRL].

According to the current records of the Investment Promotion Authority, RRL is owned by Koiti Mel [53%], Peter Pena [40%], and Thomas Dott [7%].

However, PNGi has sighted a set of signed RRL Board Minutes, for a meeting held at the Gateway Hotel on 23rd November 2016, that suggest the IPA record may not be accurate. The meeting was attended by Mel, Pena and Dott. At the meeting the RRL Board resolved ‘to transfer 80% of the shares (8,000 out of 10,000 issued shares) and corresponding interest in EL 1611 to Petroleum Parks Holdings Ltd’.

The remaining 2000 shares were to be retained by Mel [1,000], Pena [900] and Henry Korowa [100]. It was also resolved that Velu and Pepena be appointed to the Board and that Dot resign.

Mineral exploration licence EL 1611 covers an area near Mount Hagen. In 2009, Harmony Gold acquired the rights to explore the area from RRL for a period of four years with an option to purchase for K6 million. It is presumed Harmony never exercised that right and hence EL 1611 is still held by RRL.

According to the RRL Annual Return for 2016, signed by Mel in July 2017, RRL has assets of K8,000,000 and no liabilities. The AR also still declares Mel, Dott and Pena to be the only shareholders.

Peter Pena featured in both the investigations of the Commission of Inquiry into the Department of Finance and the Commission of Inquiry into the National Provident Fund. The former inquiry found Peter Pena had engaged in “dishonourable, improper and unprofessional behaviour” in assisting MP Andrew Maid with an unlawful claim and profiting from that exercise.

Peter Pena, remember, also sits on the Board of the Hong Kong registered Petroleum Parks Holdings Limited.

Has PPHL actually purchased 80% of the shares in RRL? If so, why is this not reflected in the records of the IPA and was the purchase approved by the Board of KPPA? If it was approved, on what basis and with what independent advice? How was the price to be paid determined? How does the purchase of a company with a petroleum exploration licence fit with the stated purpose of KPPA?

South Pacific Oil and Gas Limited

Like Pacific (PNG) Oil & Gas, South Pacific (PNG) Oil & Gas Limited [SPOGL] was registered in June 2014 by Able (Abel) Wain. He owns all the 100 issued shares.

As with Pacific (PNG) Oil & Gas, the Australian, Gudmundur Fridriksson, was appointed to the Board of SPOGL in 13 October 2014. Ten days later, on 23 October, the Board resolved that Wain cease to be a director.

As with POGL, Gudmundur Fridriksson ceased as a Director with SPOGL in April 2017.

Despite these similarities between POGL and SPOGL, there is no indication in the records of SPOGL that KPPA or PPHL have any interest; it is simply noted here to give a complete picture.

Conclusion

So what are we to make of all of this?

State enterprises were established as a mechanism for ensuring nationals could control a greater share of our country’s wealth, set against a colonial backdrop of foreign domination.

They are also a method, through which the national government can use economies of scale, backed by state power, to strategically foster certain sectors and industries, that generate employment and business opportunities for nationals, set against a global market context, which has always disadvantaged nations of the Global South.

But when state-enterprises fall into the hands of corrupt cabals, they become a mechanism for looting public resources, which only serves to exacerbate inequality and make PNG less competitive internationally.

PNGi alone has pointed to a growing number of worrying examples, where evidence indicates state-enterprises are being used for illicit ends, rather than tackling the ongoing legacies of colonialism, and global disparities in market power. Which is no advertisement though for privatisation – the private sector, as much as the public sector, has demonstrated an addiction to the engorged profits accrued from manipulating markets and dodging regulation.

The Konebada Petroleum Park Authority appears to be one link in a chain of broken state enterprises.

The National Research Institute has already suggested the Konebada Petroleum Park is ‘a State-Sanctioned scam’ and nothing that PNGi has subsequently uncovered suggests otherwise.

To the evidence of unlawful land grabbing and serious financial mismanagement, that dates all the way back to the Park’s first iteration as a private company and seems to be still continuing today, can now be added a series of shady corporate deals that surely demand vigorous and independent inquiry:

• Who are the beneficial owners of Petroleum Parks Holdings Limited?
• How did Samuel Pepena become involved in PPHL; who made the decision to involve him and what is his nationality status?
• What is the relationship between the PNG registered PPHL and the company of the same name registered in Hong Kong?
• Who are the beneficial owners of the Hong Kong PPHL?
• What were the circumstances of PPHL becoming a shareholder in Pacific Oil and Gas and the subsequent sale of its interest for K5 million plus?
• What is the full story around PPHL buying a company, Bismarck Oil, from the Deputy Chair of the Park Authority?
• What is the relationship between PPHL and Regional Resources PNG Limited and the status of its exploration licence?
• What are the circumstances surrounding Peter Pena’s role as a shareholder in RRL and director of PPHL HK and how have any potential conflicts been managed?

While there might be serious doubts that government authorities will initiate any sort of inquiry into these issues, we hope that by highlighting them here the international community will be put on notice and that those who have further information will be encouraged to contact us – [email protected].

Complete confidentiality is, of course, assured.