Final Report on an Investigation into the Alleged Improper Borrowing of Au$1.239 Billion Loan from the Union Bank Of Switzerland

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    Final Report on an Investigation into the Alleged Improper Borrowing of Au$1.239 Billion Loan from the Union Bank Of Switzerland, Aktiengesellschaft (Australia Branch) to Purchase 149,390,244 Shares In Oil Search Limited and Improper Tender and Procurement of Consultants in Relation to the Borrowing.

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  • Ombudsman Commission
    of Papua New Guinea

    AN INVESTIGATION INTO THE ALLEGED IMPROPER
    BORROWING OF AU$1.239 BILLION LOAN FROM THE UNION
    BANK OF SWITZERLAND, AKTIENGESELLSCHAFT (AUSTRALIA
    BRANCH) TO PURCHASE 149,390,244 SHARES IN OIL SEARCH
    LIMITED AND IMPROPER TENDER AND PROCUREMENT OF
    CONSULTANTS IN RELATION TO THE BORROWING.

    FINAL REPORT
    DECEMBER 2018

    TABLE OF CONTENTS

    TABLE OF CONTENTS
    ii

    ABBREVIATION
    vii

    GLOSSARY OF TERMS
    ix

    GLOSSARY OF PERSONS REFERRED TO IN THE REPORT
    xii

    CHRONOLOGY
    xiv

    EXECUTIVE SUMMARY
    xlv

    1. JURISDICTION AND PURPOSE OF INVESTIGATION
    1

  • Page 2 of 475

  • [1.1] INTRODUCTION
    1

    [1.2] JURISDICTION OF THE OMBUDSMAN COMMISSION
    4

    [1.3] PURPOSE OF THE INVESTIGATION
    5

    [1.4] METHOD OF INQUIRY
    6

    [1.5] WITNESSES WHO GAVE EVIDENCE BEFORE THE COMMISSION
    7

    [1.6] OMBUDSMAN COMMISSION NOT CONFINED TO REPORTING ON LEGALITY OF
    ADMINISTRATIVE CONDUCT
    7

    [1.7] WHAT IS ―WRONG CONDUCT‖?
    8

    [1.8] THE PROVISIONAL REPORT
    8

    [1.9] RESPONSE FROM THE PRIME MINISTER HON PETER O‘NEILL, CMG, MP,
    10

    [1.10]CHALLENGE ON OMBUDSMAN COMMISSION‘S JURISDICTION – SCR NO: 15
    OF 2015 17

    [1.11]RESPONSE FROM THE ACTING SECRETARY FOR TREASURY, MR DAIRI VELE
    18

    2. FINDINGS OF FACTS
    20

    PART 1 THE DECISION OF THE NATIONAL EXECUTIVE COUNCIL TO BORROW UBS
    AG
    (AUSTRALIA BRANCH) LOAN AND IT‘S IMPLEMENTATION
    20

    [1] NEC DECISION NO: 37/2013 ON THE RE-FINANCING OF THE
    INTERNATIONAL
    PETROLEUM INVESTMENT COMPANY (IPIC) EXCHANGEABLE BOND
    20

    [2] BANK OF PAPUA NEW GUINEA RECOMMENDED UBS AG AS THE LENDER OF
    THE
    LOAN TO RE-FINANCE THE IPIC EXCHANGEABLE BOND
    22

    [2.1] RESPONSE FROM THE GOVERNOR OF BANK OF PAPUA NEW GUINEA MR LOI
    BAKANI

  • Page 3 of 475

  • 31

    Table of Contents
    Page ii

    [3] THE STATE ENGAGES UBS AG TO FINANCE PURCHASE OF NEW SHARES IN
    OIL
    SEARCH LIMITED 33

    [4] BUY BACK OF IPIC EXCHANGEABLE BOND BY THE STATE FAILS 35

    [5] THE PRIME MINISTER‘S MEETING WITH MR PETER BOTTEN, MANAGING
    DIRECTOR OF OIL SEARCH LIMITED 36

    [6] THE ACTING SECRETARY, DEPARTMENT OF TREASURY, INVOLVEMENT IN
    THE
    WHOLE UBS AG TRANSACTION 39

    [6.1] RESPONSE FROM MR DAIRI VELE 43

    [7] STATE SOLICITOR‘S ADVICE ON THE WHOLE OF UBS AG TRANSACTION 57

    [8] NEC DECISION TO PURCHASE SHARES IN OIL SEARCH LIMITED 64

    [9] HON DON POLYE MP DECOMMISSIONED AS MINISTER FOR TREASURY 71

    [10] INVOLVEMENT OF INDEPENDENT PUBLIC BUSINESS CORPORATION 74

    [11] INDEPENDENT PUBLIC BUSINESS CORPORATION BOARD DECISION 78

    [12] INVOLVEMENT OF PETROMIN PNG HOLDINGS LIMITED 79

    [13] INVOLVEMENT OF NATIONAL PETROLEUM COMPANY OF PAPUA NEW GUINEA
    (KROTON) LIMITED 81

    PART 2 ENGAGEMENT OF CONSULTANTS TO FACILITATE THE BORROWING OF UBS
    AG
    LOAN 90

    [1] ENGAGEMENT OF LEGAL CONSULTANTS 90
    [1.1] RESPONSE FROM MR DAIRI VELE 92

    [2] ENGAGEMENT OF FINANCIAL AND TECHNICAL CONSULTANTS 94
    [i] ENGAGEMENT OF UBS AG AS FINANCIAL ADVISOR AND LEAD ARRANGER
    FOR
    THE REFINANCING OF IPIC EXCHANGEABLE BOND 94
    [2i] RESPONSE FROM MR DAIRI VELE 100

    [ii] ENGAGEMENT OF KPMG AND PACIFIC CAPITAL LIMITED TO FACILITATE
    THE
    BORROWING OF UBS AG LOAN
    101
    [2ii] RESPONSE FROM MR DAIRI VELE ON THE ENGAGEMENT OF KPMG AND

  • Page 4 of 475

  • PACIFIC CAPITAL LIMITED 106
    [2iii] RESPONSE FROM MR FRANK KRAMER 107

    [3] MR DAIRI VELE‘S, ACTING SECRETARY, DEPARTMENT OF TREASURY,
    ENGAGEMENT OF CONSULTANTS TO FACILITATE THE UBS AG LOAN
    TRANSACTION 108
    [3.1] RESPONSE FROM MR DAIRI VELE
    113

    [4] REQUEST FOR A CERTIFICATE OF INEXPEDIENCY FOR THE ENGAGEMENT
    OF
    CONSULTANTS
    115
    [4.1] RESPONSE FROM MR DAIRI VELE
    117

    [5] STATE SOLICITOR‘S ADVICE ON THE ENGAGEMENT OF CONSULTANTS TO
    FACILITATE THE BORROWING
    118

    [6] CENTRAL SUPPLY & TENDERS BOARD APPROVED THE ISSUANCE OF THE
    CERTIFICATE OF INEXPEDIENCY 122
    Table of Contents Page
    iii

    [6.1] RESPONSE FROM MR DAIRI VELE
    128

    [7] DR KEN NGANGAN, ACTING SECRETARY FOR DEPARTMENT OF FINANCE
    APPROVED THE AUTHORITY TO PRE-COMMIT FUNDS
    131
    [7.1] RESPONSE FROM DR KEN NGANGAN
    134

    [8] PRIVATE CONSULTANTS PREPARE POLICY SUBMISSION & OTHER
    DOCUMENTS
    FOR THE NATIONAL EXECTIVE COUNCIL
    135
    [8.1] RESPONSE FROM MR DAIRI VELE
    140

    [9] EXECUTION OF THE LOAN CONTRACT
    141

    PART 3 PAYMENTS MADE TO CONSULTANTS AND UBS AG AS PER NEC DECISION
    NO. 79/2014 144

    [1] PAYMENTS MADE TO UBS AG (AUSTRALIA BRANCH)
    144

    [2] PAYMENTS TO OTHER CONSULTANTS
    147
    [2.1] RESPONSE FROM MR DAIRI VELE

  • Page 5 of 475

  • 150

    [3] DR KEN NGANGAN, ACTING SECRETARY FOR DEPARTMENT OF FINANCE
    APPROVED THE RELEASE OF FUNDS FOR CONSULTANTS
    151

    [3.1] RESPONSE FROM DR KEN NGANGAN
    153

    [4] PAYMENTS MADE TO UBS AG BY NATIONAL PETROLEUM COMPANY OF
    PAPUA
    NEW GUINEA (KROTON) LIMITED
    154

    [5] LOAN AND INTEREST PAYMENT TO UBS AG (AUSTRALIA BRANCH)
    158
    [5.1] RESPONSE FROM MR DAIRI VELE
    166

    3. INTERVIEWS WITH WITNESSES
    168

    [3.1] EVIDENCE GIVEN BY HON DON POLYE, THEN MINISTER FOR TREASURY
    168

    [3.2] EVIDENCE GIVEN BY MR DANIEL ROLPAGAREA, STATE SOLICITOR
    168

    [3.3] EVIDENCE GIVEN BY HON KERENGA KUA, THEN MINISTER FOR JUSTICE
    AND
    ATTORNEY-GENERAL
    169

    [3.4] EVIDENCE GIVEN BY MR LOI BAKANI, GOVERNOR FOR BANK OF PAPUA
    NEW
    GUINEA
    169

    [3.5] EVIDENCE GIVEN BY MR DAIRI VELE, ACTING SECRETARY FOR THE
    DEPARTMENT
    OF TREASURY
    169

    [3.6] EVIDENCE GIVEN BY MR ANTHONY YAUIEB, DEPUTY SECRETARY
    (POLICY),
    DEPARTMENT OF TREASURY
    170

    [3.7] EVIDENCE GIVEN BY MR WASANTHA KUMARASIRI, THE MANAGING
    DIRECTOR
    FOR IPBC
    170

    4. FINDINGS

  • Page 6 of 475

  • 171

    [4.1] FINDING No. 1
    171

    [4.2] FINDING No. 2
    172

    [4.3] FINDING No. 3
    173

    Table of Contents
    Page iv

    [4.4] FINDING No.4 174

    [4.5] FINDING No. 5 175

    [4.6] FINDING No. 6 176

    [4.7] FINDING No. 7 178

    [4.8] FINDING No. 8 179

    [4.9] FINDING No. 9 180

    [4.10]FINDING No. 10 190

    [4.11]FINDING No. 11 195

    [4.12]FINDING No. 12 197

    [4.13]FINDING No. 13 201

    [4.14]FINDING No. 14 205

    [4.15]FINDING No. 15 206

    [4.16]FINDING No. 16 210

    [4.17]FINDING No. 17 211

    [4.18]FINDING No. 18 212

    [4.19]FINDING No. 19 214

    [4.20]FINDING No. 20 215

    5. RECOMMENDATIONS 217

    [5.1] CONSTITUTIONAL FRAMEWORK FOR MAKING RECOMMENDATIONS 217

    [5.2] RECOMMENDATIONS CONCERNING PARTICULAR INDIVIDUALS 218

  • Page 7 of 475

  • [5.3] RECIPIENTS OF RECOMMENDATIONS 218

    [5.4] RESPONSIBLE MINISTERS 218

    [5.5] MINISTERS RESPONSIBLE FOR FOLLOWING UP ON THE IMPLEMENTATION
    OF
    RECOMMENDATIONS 218

    [5.6] DUTIES OF RECIPIENTS TO ACT ON THE RECOMMENDATIONS 219

    [5.7] RECOMMENDATIONS 219

    [5.7.1] RECOMMENDATION No. 1 220

    [5.7.2] RECOMMENDATION No. 2 221

    [5.7.3] RECOMMENDATION No. 3 221

    [5.7.4] RECOMMENDATION No. 4 222

    [5.7.5] RECOMMENDATION No. 5 223

    Table of Contents Page v

    [5.7.6] RECOMMENDATION No. 6
    224
    [5.7.7] RECOMMENDATION No. 7
    224
    [5.7.8] RECOMMENDATION No. 8
    225
    [5.7.9] RECOMMENDATION No. 9
    226
    [5.7.10] RECOMMENDATION No. 10
    227
    [5.7.11] RECOMMENDATION No. 11
    227
    [5.7.12] RECOMMENDATION No. 12
    228
    [5.7.13] RECOMMENDATION No. 13
    229
    6. CONCLUSION
    231
    7. APPENDIX
    232
    7.1 RELEVANT LAWS AND SPECIFIC PROVISIONS
    232
    [7.1.1] CONSTITUTION OF THE INDEPENDENT STATE OF PAPUA NEW GUINEA
    232
    [7.1.2] ORGANIC LAW ON THE OMBUDSMAN COMMISSION
    236
    [7.1.3] ATTORNEY-GENERAL ACT 1989

  • Page 8 of 475

  • 237
    [7.1.4] CENTRAL BANKING ACT 2000
    237
    [7.1.5] LOANS (OVERSEAS BORROWING) ACT (CHAPTER 133)
    238
    [7.1.6] LOANS (OVERSEAS BORROWINGS) (No.2) ACT (CHAPTER 133A)
    240
    [7.1.7] OFFICIAL PERSONNEL STAFF ACT (CHAPTER 383)
    243
    [7.1.8] PAPUA NEW GUINEA FISCAL RESPONSIBILITY ACT 2006
    243
    [7.1.9] INDPENDENT PUBLIC BUSINESS CORPORATION OF PAPUA NEW GUINEA
    ACT 2002 243
    [7.1.10] PETROLEUM PNG HOLDINGS LIMITED AUTHORIZATION ACT 2007
    244
    [7.1.11] COMPANIES ACT 1997
    244
    [7.1.12] LAWYERS ACT 1986
    245
    [7.1.13] OATHS, AFFIRMATIONS AND STATUTORY DECLARATIONS ACT (CHAPTER
    317) 245
    [7.1.14] PUBLIC FINANCE (MANAGEMENT) ACT 1995
    245
    [7.1.15] THE FINANCE MANAGEMENT MANUAL
    250
    [7.2] INVESTMENT PETROLEUM INVESTMENT COMPANY (IPIC) LOAN AGREEMENT
    276
    [7.3] UBS AG LOAN DOCUMENTS
    280

    Table of Contents
    Page vi

    ABBREVIATION
    Act – The Act of Parliament
    APC – Authority to Pre – Commit
    BPNG – Bank of Papua New Guinea
    CoI – Certificate of Inexpediency
    Constitution – Constitution of the Independent State of Papua New
    Guinea
    CSTB – Central Supply & Tenders Board
    DJAG – Department of Justice & Attorney-General
    DoF – Department of Finance
    DoPE – Department of Public Enterprise
    DoT – Department of Treasury
    FAI – Foreign Affairs & Immigration
    FMM – Finance Management Manual
    GGPNG – Governor-General of Papua New Guinea
    GloCo – PNG Liquefied Natural Gas Global Company LDC
    GoPNG – Government of Papua New Guinea
    Hon – Honourable
    IPBC – Independent Public Business Corporation

  • Page 9 of 475

  • IPIC – International Petroleum Investment Company
    IRC – Internal Revenue Commission
    KPMG – Klynveld Peat Marwick Main Goerdeler
    LNG – Liquefied Natural Gas
    Ltd – Limited
    MD – Managing Director
    Abbreviation Page vii

    MP – Member of Parliament
    NEC – National Executive Council
    NPCP – National Petroleum Company of PNG (Kroton) Ltd
    Commission – Ombudsman Commission of Papua New Guinea
    OLOC – Organic Law on the Ombudsman Commission
    PFMA – Public Finance (Management) Act 1995
    PNGLS – Papua New Guinea Law Society
    PRL – Petroleum Resource Licence
    Pty – Propriety
    State – The Independent State of Papua New Guinea
    SE&SI – State Enterprise & State Investments
    State Sol – State Solicitor
    UBS AG – Union Bank of Switzerland, Aktiengesellschaft
    (Australia Branch)

    Abbreviation Page viii

    GLOSSARY OF TERMS

    Introduction
    The terminologies listed and defined in this Glossary were taken
    from the UBS AG Loan
    documents, the Internet and Oxford Dictionary.

    Authority to Pre-Commit
    The purpose of the APC process is to ensure proper accounting,
    management and
    reporting on the Pre-Commitment of Expenditure is maintained in all
    levels of the
    National, Provincial and Local-Level Governments. The validity of
    contracts with the

  • Page 10 of 475

  • government for those authorised by the Secretary for Finance is
    evidenced by his signature
    on an Authority to Pre Commit Form.

    Authorisation
    An authorisation, consent, declaration, exemption, notarisation or
    waiver, however it is
    described; and in relation to anything that could be prohibited or
    restricted by law if a
    Government Agency acts in any way within a specified period, the
    expiry of that period
    without that action being taken, including any renewal or amendment.

    BPNG
    The Bank of Papua New Guinea is the Central Bank of the Sovereign
    Independent State of
    Papua New Guinea.

    Bond
    It is a written and signed promise to pay a certain sum of money on
    a certain date, or on
    fulfilment of a specified condition. All documented contracts and
    loan agreements are
    bonds.

    Bridge Loan
    A type of short term loan used to finance an enterprise, investment
    or government pending
    the receipt of other funds.

    Bridge Takeout Letter
    A written promise by a lender to provide a long term loan (Bridge
    Loan).

    Central Supply & Tender Board
    This is the GoPNG major procurement and tender authority that was
    empowered by the
    GoPNG to screen and further endorse contractors to be engaged by the
    State.

    Certificate of Inexpediency
    A certificate issued by the Central Supply & Tenders Board only when
    in situations where
    a declared natural disaster or defence emergency or health emergency
    occurs or there is a
    situation of civil unrest. A Certificate of Inexpediency cannot be
    applied retrospectively.

    Collar Loan
    The purchase of an out-of-the money put option is what protects the
    underlying shares
    from a large downward move and locks in the profit. The price paid
    to buy the puts
    (shares first placed on the stock market) is lowered by amount of

  • Page 11 of 475

  • premium that is collect
    Glossary Page ix

    by selling the out of the money call (the time which the share was
    placed). The ultimate
    goal of this position is that the underlying stock continues to rise
    until the written strike
    (agreed market value price of shares) is reached.

    Distribution
    Any payment or distribution of money or other property (including by
    management or
    other fee, interest on shareholder loans, dividend, return of
    capital, repayment or
    redemption) to or for the benefit of any holder (in that capacity)
    of securities issued.

    CHESS
    The Clearing House Electronic Sub-register System operated by the
    ASX Settlement and
    Transfer Corporation Pty Ltd (ASTC).

    Exchangeable Bond (XB)
    A security consisting of a straight bond and option to exchange the
    bond for the stock of
    the company other than the Issuer (usually a subsidiary or company
    in which the Issuer
    owns a stake) at some future date and under prescribed conditions.

    Facility Agent
    The UBS AG, Australia Branch ABN 47 088 129 613.

    Facility Agreement
    The Bridge Facility Agreement that was dated on or about the date of
    the Payment
    Direction Deed between, among others, the Borrower and the Facility
    Agent.

    Fee Letter
    The letter or letters dated on or about the date of the Bridge
    Agreement between the
    parties to the agreement.

    GloCo
    The Papua New Guinea Liquefied Natural Gas Global Company LDC.

    IPBC
    The Independent Public Business Corporation is the major shareholder
    in NPCP

    IPIC Loan
    Loan obtained by the State from International Petroleum Investment
    Company based in

  • Page 12 of 475

  • Abu Dhabi in 2009 to finance the PNG LNG Project.

    NPCP
    The National Petroleum Company of Papua New Guinea (Kroton) Ltd was
    created as the
    receivership of proceeds from the PNG LNG project.

    Payment Direction Deed
    This is the document that contains the directions that NPCP agreed
    to instruct and direct
    GloCo to pay, in immediately available funds, all Distributions
    which are to be paid to
    NPCP in relation to the Share Holding from time to time, to a bank
    account in the name of
    NPCP with the Facility Agent or an affiliate of the Facility Agent
    with such account to be
    located in Singapore.

    Glossary Page x

    Rollover Collar
    A rollover Collar loan is essentially a loan that gets renewed at a
    defined point, as
    stipulated in a loan contract. There are several types of rollovers,
    each different from the
    others except for this principal idea of renewal.

    Share Holding
    All shares or other securities held by NPCP in GloCo from time to
    time.

    Specific Security Deed
    Specific security deed dated on or about the date of this document
    granted by the
    Borrower in favour of the Security Trustee over certain OSH Shares
    held by the Borrower.

    Security Trust Deed
    The security trust deed dated on or about the date of this UBS AG
    Contract Agreement
    document between the borrower and the Security Trustee.

    Share
    A unit at a value for various investments.

    Share placement
    This is one way a company can raise additional share capital –
    particularly if funds are
    needed relatively quickly – is to do a ―share placement‖, ie., by
    way of ―placing‖ some
    shares with an investor/s at a share price that might typically be a
    say 15 – 25% discount to

  • Page 13 of 475

  • the most recent share issue or (particularly where stock exchange
    listed) market price of
    the company‘s shares.

    Side Letter
    This is a letter to confirm certain of the terms and conditions on
    agreement of the UBS AG
    Loan Contract Agreement.

    Sovereign Bond
    A debt security issued by a national government within a given
    country and denominated
    in a foreign currency. The foreign currency used will most likely be
    a hard currency, and
    may represent significantly more risk to the bondholder.

    Subscription Agreement
    It is an agreement signed on 27 February 2014 between the Equity
    Derivative Financier
    (UBS AG) and Oil Shares Limited.

    Substantial shareholders notice
    Notice of change of interests of substantial holder of shares
    (completed and filed by Oil
    Search Ltd on Australian Stock Exchange).

    Term Loan
    It is a monetary loan that is repaid in regular payments over a set
    period of time. Term
    loans usually last between one and ten years, but may last as long
    as 30 years in some
    cases. A term loan usually involves an unfixed interest rate that
    will add additional
    balance to be repaid.

    UBS AG
    Union Bank of Switzerland in which the loan was obtained.
    Glossary Page xi

    GLOSSARY OF PERSONS REFERRED TO IN THE REPORT

    Sir Michael Ogio, GCL, GCMG, KStJ
    Governor-General of PNG

    Hon Peter O‘Neill, CMG, MP
    Prime Minister of Papua New Guinea

    Hon James Marape, MP
    Minister for Finance

    Hon Ben Micah, MP
    Minister for State Enterprise & State Investments

  • Page 14 of 475

  • s
    Hon Kerenga Kua, MP
    Former Attorney-General and Minister for Justice

    Dr Ken Ngangan, PhD. CMA, CPA
    Acting Secretary, Department of Finance

    Hon Rimbink Pato, LLB, OL
    Minister for Foreign Affairs & Immigrations

    Hon Don Pomb Polye, MP
    Former Minister for Treasury

    Ambassador Isaac B. Lupari, CBE
    Chief of Staff to the Prime Minister

    Dr Lawrence Kalinoe, LLB, LLM, PhD
    Secretary for Department of Justice

    Mr Loi Bakani, CMG, CBE
    Governor of Bank of Papua New Guinea

    Ms Betty Palaso
    Commissioner-General, Internal Revenue Commission
    n
    Mr Dairi Vele,
    Acting Secretary for Department of Treasury

    Mr Daniel Rolpagarea,
    State Solicitor

    Mr Ilagi Veali, MPS
    Secretary, National Executive Council

    Glossary Page xii

    Mr Philip Eludeme,
    Chairman, Central Supply & Tenders Board

    Mr Anthony Yauieb
    Deputy Secretary, Policy for Department of Treasury

    Mr Babaga R. Naime
    Acting Board Secretary for Central Supply & Tenders Board

    Dr Clement Waine, PhD
    Secretary, Department of Public Enterprise & State Investments

    Mr Wasantha Kumarasiri,
    MD for Independent Public Business Corporation

    Mr Erastus Kamburi,

  • Page 15 of 475

  • Chief Legal Officer for Independent Public Business Corporation

    Mr Wapu R Sonk,
    MD for National Petroleum Company of PNG (Kroton) Ltd

    Mr Rogen Wato,
    Company Secretary, National Petroleum Company of PNG (Kroton) Ltd

    Mr Frank Kramer,
    Chairman for National Petroleum Company of PNG (Kroton) Ltd

    Mr Guy Fowler,
    MD for UBS AG

    Ms Celle Raguine
    Representatives of UBS AG

    Mr Luke Goldsworthy
    Representative of UBS AG

    Mr Peter Botten,
    MD for Oil Search Ltd

    Mr Peter Graham,
    MD for PNG Liquefied Natural Gas Global Company LDC (GloCo)

    Ms Tessa Hoser
    Norton Rose Fulbright of Australia

    Mr Carl Okuk
    Lawyer and Consultant

    Glossary Page xiii

    CHRONOLOGY

    1995

    1. On 5 December, the Investment Promotion Authority (IPA)
    registered Pacific Capital Ltd
    whose Shareholders also include Mr Frank Michael Kramer.

    2009

    2. On 5 March, the Government of PNG (GoPNG) mortgaged its shares in
    Oil Search Ltd
    with International Petroleum Investment Company (IPIC), Abu Dhabi
    and acquired the
    needed funding and it financed the State‘s share of the capital

  • Page 16 of 475

  • expenditure for the PNG
    LNG project.

    3. On 1 July, the IPA registered Pertusio Capital Partners Ltd whose
    Shareholders also
    include Mr Dairi Vele.

    2013

    4. On 25 June, Prime Minister Hon Peter O‘Neill, CMG, MP (Prime
    Minister) advised Hon
    Kerenga Kua, MP, the then Attorney-General that a Brief-Out on
    legal services should be
    publicly tendered.

    5. On 6 August, the National Executive Council (NEC) appointed Mr
    Dairi Vele, as the
    Acting Secretary for the Department of Treasury (DoT).

    6. On 12 August, the DoT officials met with Union Bank of
    Switzerland, Aktiengesellschaft,
    Australia Branch (UBS AG) officials at Sydney, Australia.

    7. On 13 August, the DoT officials met with Morgan Stanley officials
    in Sydney, Australia.

    8. On 14 August, the DoT officials met with JP Morgan officials at
    Sydney, Australia.

    9. On 15 August, the DoT officials held a second meeting with UBS AG
    officials at Sydney,
    Australia.

    10. On 16 August, the DoT officials met with Credit Suisse officials
    at Sydney, Australia.

    11. On 19 December, the NEC during a Special Meeting No: 37/2013 in
    its Decision No:
    479/2013 that the BPNG provide final evaluations on the proposals
    from Citi Bank and
    UBS AG to re-finance the International Petroleum Investment
    Company (IPIC)
    Exchangeable Bond.

    12. On 20 December, Hon Ben Micah, MP, Minister for State
    Enterprises and State
    Investment (SE&SI) wrote to Mr Loi Bakani, CMG, CBE, the Governor
    of Bank of Papua
    New Guinea (BPNG) and requested the BPNG to evaluate the
    potential financiers‘
    proposals to re-finance the IPIC Exchangeable Bond.

  • Page 17 of 475

  • Chronology of Events Page xiv

    13. On 22 December, Mr Bakani advised Minister Micah that the four
    financiers should have
    been provided all the information and requested to bid for the
    Exchangeable Bond re-
    financing facility.

    14. On 27 December, Minister Micah requested Mr Bakani for
    clarification on the BPNG‘s
    advice on the four proposals by Hemsley Capital, ANZ/Barclay,
    CitiBank and UBS AG in
    regard to the refinancing of the IPIC Exchangeable Bond.

    2014

    15. On 7 January, Mr Bakani advised Minister Micah that the State
    re-negotiate the funding
    structure of the proposals with the two Financiers, the UBS AG and
    Citi Bank in the event
    that the negotiations do not meet the State objectives, the State
    should consider othr
    Financiers.

    16. On 9 January, Mr Bakani forwarded the BPNG‘s recommendations to
    Minister Micah as
    requested that included the invitation of other potential
    Financiers apart from Citi Bank
    and UBS AG to re-finance the IPIC Exchangeable Bond.

    17. On even date, Mr Bakani requested the Prime Minister to allow
    the BPNG the mandate to
    assist the State in meeting the basic re-financing requirements in
    the negotiation process.

    18. On 14 January, Mr Wasantha Kumarasiri of Independent Public
    Business Corporation
    (IPBC), requested Mr Bakani to correct his advice to Minister
    Micah as it was incorrect
    and misleading when the actual amount should be AU$1.681 Billion
    and not AU$1.8
    Billion.

    19. On 15 January, Minister Micah wrote to Mr Bakani and requested
    that the BPNG provide
    its final recommendations on the two Banks, UBS AG and Citi Bank.

    20. On 16 January, Mr Bakani requested all parties including the
    BPNG, Minister Micah,
    IPBC, and the DoT to draft the Terms of Reference to be used
    during negotiations with
    potential Financiers.

  • Page 18 of 475

  • 21. On 17 January, Mr Bakani wrote to and advised Mr Kumarasiri that
    the BPNG‘s
    evaluations and recommendations were based on information provided
    in accordance with
    the NEC Decision No: 479/2013 in its Special Meeting No: 37/2013
    that approved for BPNG
    to provide final evaluations on the proposals from Citi and UBS AG
    to refinance the IPIC
    Exchangeable Bonds; that Minister Micah advice the Government of
    United Arab
    Emirates the GoPNG‘s decision to redeem the IPIC Exchangeable
    Bonds and directed
    Miniser Micah to report back to NEC by end of January 2014 with
    the final evaluation
    report provided by BPNG.

    22. On even date, Mr Bakani requested Ms Natalie Yacoubian of Banque
    Nationale de Paris
    Paribas (BNP Paribas) to resubmit PNP Paribas proposal
    incorporating the refined terms.

    23. On even date, Mr Bakani requested Mr Mitchell Turner of UBS AG
    to resubmit UBS AG
    proposal incorporating the refined terms.

    24. On even date, Mr Bakani requested Mr Philip Graham to resubmit
    Citi Bank‘s proposal
    incorporating the refined terms.

    Chronology of Events Page xv

    25. On even date, Minister Micah advised Mr Bakani that he expected
    a recommendation by
    Wednesday 22 January 2014.

    26. On 23 January, Mr Bakani recommended to the NEC to request the
    Abu Dhabi
    Government for an extension of six months, to allow time to
    improve on the proposal by
    BNP Paribas, the superior proposal, as well as the UBS AG, Citi
    Bank and ANZ/Barclays.

    27. On 27 January, Hon Don Polye, Minister for Treasury wrote to Mr
    Bakani and requested
    for a full brief on the implementation of the NEC‘s Decision No.
    479/2013 regarding the re-
    financing of IPIC Exchangeable Bond.

    28. On even date, after its inconclusive asseement of the proposals
    from BNP Paribas, UBS
    AG, Citi Bank and ANZ/Barclays, Mr Bakani, recommended the UBS AG
    to Minister
    Micah, for the refinancing of the IPIC Exchangeable Bond.

  • Page 19 of 475

  • 29. On 30 January, Mr Vele engaged UBS AG to act as the sole
    Financial Advisor and Lead
    Arranger, in relation to the management of the investment of the
    State in Oil Search Ltd by
    way of letter.

    30. Mr Bakani informed the Directors for Investment Banking, UBS AG
    that the State had
    accepted its proposal to re-finance IPIC Exchangeable Bond worth
    AU$1.7 Billion and that
    UBS AG to confirm in writing its commitment to fund the AU$1.7
    Billion IPIC
    Exchangeable Bond.

    31. On even date, Minister Micah noted Mr Bakani‘s recommendations
    but he advised that
    the six months extension recommended would incur costs and was not
    possible.

    32. On 3 February, Minister Micah informed Mr Frank Kramer, Chairman
    for National
    Petroleum Company of PNG Ltd (NPCP) Board regarding the
    Exchangeable Bond and the
    appointment of UBS AG. At that material time, the Speaker of
    Parliament was yet to
    certifiy Kroton Act.

    33. On even date, Hon Minister Micah accepted the BPNG‘s
    recommendations and the
    NPCP‘s lead to re-finance IPIC Exchangeable Bond process on behalf
    of the Independent
    State of Papua New Guinea (State), even though NPCP had no legal
    basi to conduct
    business for and on behalf of the country and the government of
    PNG.

    34. On 4 February, the Prime Minister advised HH Sheik Mansour bin
    Zayed Al Nahyan that
    the State wanted to retain its shares in Oil Search Ltd.

    35. On 7 February, Mr Bakani re-assured Minister Micah on its
    recommendation to use UBS
    AG to re-finance IPIC Exchangeable Bond.

    36. On 13 February, a Mandatory Exchange Notice to Deutche Bank AG,
    London Branch
    (Exchange Agent) indicated that the IPIC did not want to sell its
    shares to Government of
    Papua New Guinea (GoPNG).

    37. On even date, Mr John Leahy, Head of Business Assurance & Asset
    Serving, National
    Nominees Limited, consented and became a member of Oil Search Ltd

  • Page 20 of 475

  • and undertook
    trading of Shares on the Australian Stock Exchange.

    Chronology of Events Page xvi

    38. On 23 February, the Prime Minister, Mr Peter Botten, MD of Oil
    Search Ltd, Mr Gerea
    Aopi, Board Chairman for Oil Search Ltd and Mr Vele met at Grand
    Papua Hotel and
    decided over a cup of coffee for the State to buy 149, 390, 244
    shares which translated to 10.01
    % shareholding in Oil Search Ltd.

    39. On 24 February, Hon Rimbink Pato, MP, Minister for Foreign
    Affairs and Immigration
    (FAI) advised HH Sheikh Abdullah bin Zayed Al Nahyan, the
    Minister for FAI, Abu
    Dhabi, United Arab Emirates, that the GoPNG wanted to retain
    ownership of the Oil
    Search Ltd shares.

    40. On 25 February, UBS AG wrote to Mr Vele and outlined the terms
    of engagement of UBS
    AG as the Sole Financial Advisor and Sole Lead Arranger that was
    effected on 30 January
    2014, in relation to the management of the investment of the
    State in Oil Search Ltd and
    associated matters flowing from the issuance in 2009 of
    Exchangeable Bond in respect of
    the State‘s 196.6 million shares in Oil Search Ltd to the IPIC of
    Abu Dhabi. This is done
    with a conflict of interest.

    41. On even date, trading in Oil Search Ltd shares halted ahead of
    its announcement issuing
    shares to existing shareholders and interested buyers.

    42. On even date, His Excellency Grand Chief Sir Michael Ogio,
    G.C.L, G.C.MG, K.St.J the
    Governor-General of Papua New Guinea (GGPNG) signed the document
    agreements
    which were witnessed by Mr Carl Okuk as a Commissioner for Oath
    witnessing the
    agreement on the terms and conditions of engagement of UBS AG.
    The action of the
    GGPNG was improper and unconstitutional as per Section 2(1) and
    3(1) of the Loans
    (Overseas Borrowing) Act (Chapter 133).

    43. On 26 February, Prime Minister wrote to Mr Botten regarding the
    State‘s willingness to
    buy shares in Oil Search Ltd.

  • Page 21 of 475

  • 44. On 27 February, four days after the meeting, the Prime Minister
    wrote to Mr Guy Fowler,
    the MD for UBS AG regarding UBS AG proposal to provide funding
    facilities to the State
    in connection with the subscription by the State for
    approximately 149.39 million shares
    in Oil Search Ltd at AU$8.20 per share. (Refer to said dated
    letter). Facts relevant to this
    query are set out in page 38

    45. On even date, the Subscription Agreement was signed between UBS
    AG (the Equity
    Derivative Financier) and Oil Shares Limited.

    46. On even date, Oil Search Ltd shares trading were suspended ahead
    of its announcement.

    47. On even date, Oil Search Ltd announced that it had agreed to
    acquire a 22.835% gross
    interest in PRL 15 (Elk Antelope) from the Pac LNG Group
    Companies for US$900 million
    to be funded through a placement of new shares to the State.

    48. On even date, the UBS AG forwarded a Commitment Letter that was
    signed by the
    GGPNG which was witnessed by Mr Okuk.

    49. On 4 March, Ashurst Lawyers forwarded draft documents for its
    client UBS AG to the
    State that outlined the financial package that UBS AG was
    offering the State.

    Chronology of Events Page xvii

    50. On even date, Mr David Heathcote of KPMG presented KPMG‘s
    analysis on the monetised
    collars relating to financing the purchase of Oil Search Ltd
    shares.

    51. On 5 March, Mr Fowler requested the Prime Minister to intervene
    in resolving the IPIC
    Exchangeable Bond, PNG LNG direction-to-pay and Sovereign Bond
    take-out of the
    Bridge Loan.

    52. On even date, Mr Vele requested Mr Daniel Rolpagarea, the State
    Solicitor to give legal
    clearance on the documents relating to the transaction for the
    State to acquire 149,390,244
    shares in Oil Search Ltd.

  • Page 22 of 475

  • 53. On even date, Mr Rolpagarea requested Mr Vele to provide to him
    details of confirmation
    and clear instructions on the engagement of Pacific Legal Group
    Lawyers and the breach
    of Section 209 of (Parliament Responsibility) of the Constitution
    by the NEC.

    54. On even date, NPCP Board Chairman submitted a proposal to the
    IPBC Board advising of
    the State‘s acquisition of 149,390,244 shares in Oil Search Ltd
    and that UBS AG required
    NPCP to enter into a payment direction between NPCP, PNGLNG Global
    Company LDC
    (GloCo).

    55. On even date, Mr Rolpagarea advised Mr Vele that the NEC
    Submission needed approvals
    from the relevant Agencies‘ Boards and the Parliament for the
    Bridge and Collar loans
    totalling AU$1.239 Billion.

    56. On 6 March, the UBS AG issued a Bridge Takeout Letter to Mr Vele
    that outlined the
    terms of the fees payable to UBS AG as Facility Agent under the
    Bridge Facility Agreement
    that was signed by the GGPNG and witnessed by Mr Okuk.

    57. On even date the UBS AG as the Facility Agent for the loan wrote
    to Mr Vele and
    requested for the State to pay the Facility Agent fees as per the
    Bridge Facility Agreement
    that was signed by the GGPNG and witnessed by Mr Okuk.

    58. On even date, the UBS AG as the Security Trustee for the loan
    wrote to Mr Vele and
    requested for the State to pay the Security Trustee fees as per
    the Bridge Facility
    Agreement that was signed by the GGPNG and witnessed by Mr Okuk.

    59. On even date, the Prime Minister submitted an NEC Policy paper
    No: 67/2014 to the NEC.

    60. On even date, the NEC in its Decision No: 79/2014 appointed
    Petromin as the State‘s
    subscriber and nominee for the transaction, confirmed the
    authority of the Treasurer,
    execute the Payment Direction Deed by NPCP, approved the payment
    direction by IPBC,
    Central Supply Tender Board (CSTB) to issue a Certificate of
    Inexpediency (COI) and
    Authority to Pre-Commit (APC) to be executed by the Department of
    Finance (DoF).

    61. On even date, Mr Vele advised Minister Polye that the loan would

  • Page 23 of 475

  • not affect the State‘s
    debt program and that Petromin was the subscriber and nominee.

    62. On even date, Mr Vele requested Mr Philip Eludeme, the Chairman
    for CSTB to approve
    the request for COI at the earliest to cover the advisory costs.

    Chronology of Events Page xviii

    63. On even date, the Prime Minister advised the GGPNG, that the NEC
    approved the
    borrowing of a loan for the purpose of purchasing shares in Oil
    Search Ltd and for the
    purpose of meeting the expenses of the borrowing itself.

    64. On even date, Mr Okuk representing Mr Vele delivered 28
    documents pertaining to the
    UBS AG loan to Mr Rolpagarea for his legal clearance.

    65. On 7 March, Mr Vele explained to Mr Eludeme that the COI was
    needed to access funds
    to pay for fees pertaining to the State‘s acquisition of the
    shares in Oil Search Ltd.
    66. On even date, Mr Vele requested Mr Rolpagarea to issue legal
    clearance on the submission
    regarding the State‘s borrowing of loan arrangements.

    67. On even date, the Prime Minister informed IPBC of the
    government‘s decision to enter into
    the agreement.

    68. On even date, Ambassador (Amb) Isaac Lupari, the Chief of Staff
    to the Prime Minister,
    advised Mr Kumarasiri that the NEC approved the State‘s intent to
    borrow from UBS AG
    to fund its acquisition of shares in Oil Search Ltd.

    69. On even date, Minister Micah directed the Board of IPBC to
    approve the Payment
    Direction Deed and to sign the Payment Direction Deed on or before
    09 March 2014.

    70. On 8 March, Mr Vele emailed to and requested Dr Thomas Webster,
    the then Chairman
    for IPBC Board, to progress the documents to the IPBC Board for
    its consideration and
    approval. The electronic mail included electronic copies of
    documents that Mr Vele had
    prepared for the IPBC Board and NPCP Board to endorse and approve.
    The attachments
    are as follows:

  • Page 24 of 475

  • Memo with explanation of Transaction and the Payment Direction
    Draft Payment Direction Deed
    Draft IPBC Shareholder Resolution regarding Payment Direction
    Draft IPBC Director Resolution regarding Payment Direction
    Draft NPCP Board resolution regarding Payment Direction
    Draft Power of Attorney regarding Payment Direction.

    71. On even date, Mr Kumarasiri advised Dr Webster to issue
    instructions to the management
    of IPBC Management to prepare documents in anticipation to receive
    requests from the
    Board of NPCP with their resolutions.

    72. On 9 March, Mr Erastus Kamburi, the Chief Legal Officer for
    IPBC, requested the IPBC
    Directors to meet and discuss on the directives from the Minister
    Micah and Amb Isaac
    Lupari and the NEC Decision No: 79/2014.

    73. On even date, an Explanatory Note was prepared with the Board
    Circular Resolution
    outlining the purpose of the Special Board Meeting.

    74. On even date, the NPCP Special Board of Directors Meeting No:
    02/2014 resolved that the
    Company enter into any Transaction Document to give effect to the
    Payment Direction
    Deed and authorised Mr Sonk and Mr Wato with the Power of
    Attorney.

    Chronology of Events Page xix

    75. On even date, the NPCP Board empowered Mr Sonk and Mr Rogen
    Wato, the Company
    Secretary for NPCP with the Power of Attorney.

    76. On even date, Mr Sonk verified copies of the Shareholder
    resolutions of the NPCP dated
    09 March 2014, Minutes of a Meeting of the Board of Directors and
    Power of Attorney of
    the NPCP.

    77. On even date, Mr Wapu R Sonk, Managing Director for NPCP
    forwarded to Mr
    Kumarasiri an Extract of the Board Meeting Minutes.

    78. On even date, Mr Rolpagarea advised Mr Vele that the Treasurer
    was the authorised
    person to execute loan agreements on behalf of the State strictly
    in accordance with

  • Page 25 of 475

  • Section 209 (Parliament Responsibility) of the Constitution.

    79. On even date, Norton Rose Fulbright wrote to the GGPNG and the
    Minister for Treasury
    regarding financing of the acquisition of the shares and possible
    options to re-finance
    following completion.

    80. On even date, Norton Rose Fulbright wrote to the GGPNG outlining
    what documents
    needed to be signed in order for the State to borrow AU$1.239
    billion to purchase Oil
    Search Ltd shares.

    81. On even date, the GGPNG signed the document enabling the State
    to borrow AU$335
    million from UBS AG for the purpose of the purchase of shares in
    Oil Search Ltd and for
    the purpose of meeting the expenses of the Borrowing and for the
    services of the State.

    82. On even date, Mr Kumarasiri wrote to Hon James Marape MP,
    Minister for Finance and
    requested him to approve the Memorandum of Approval to enable NPCP
    to enter into the
    Transaction Documents.

    83. On even date, Minister Polye advised Mr Vele that he will not
    sign the documents that
    enabled the State to borrow the said UBS AG loan.

    84. On even date, Minister Marape approved the Memorandum of
    Approval that enabled
    NPCP to enter into the Transaction Documents.

    85. On 10 March, IPBC Board resolved that NPCP Directors enter into
    the Transaction
    Documents and recommend to the Minister for Finance to approve a
    proposal by NPCP to
    enter into Agreement to execute all documents that gave effect to
    the Payment Direction
    Deed.

    86. On even date, the NPCP Board deliberated and resolved and
    authorised Board to enter into
    Agreement to execute the Transaction Documents.

    87. On even date, Mr Eludeme advised Mr Vele that the CSTB resolved
    and approved the
    issuance of the COI for the awarding of contracts to both local
    and international
    Consulting Firms.

    88. On even date, Mr Vele confirmed with Mr Rolpagarea that the

  • Page 26 of 475

  • GGPNG and Minister for
    Treasury were to execute the transaction documents to purchase Oil
    Search Ltd shares on
    behalf of the State.

    Chronology of Events Page xx

    89. On even date, Mr Kumarasiri certified the Circular Resolution of
    the Board of Directors of
    IPBC that authorised the execution of the Payment Direction Deed
    by NPCP.

    90. On even date Mr Kumarasiri wrote a Memorandum of Recommendation
    recommending
    Minister Marape to approve the NPCP to enter into the Transaction
    Documents.

    91. On even date, the Prime Minister decommissioned Hon Polye as the
    Minister for Treasury.

    92. On even date, Hon Polye accepted his decommissioning as Minister
    for Treasury by the
    Prime Minister.

    93. On even date, the National Gazette No: G83 and G89 of 10 March
    2014 confirmed the
    decommissioning and replacement of Hon Polye as the Minister for
    Treasury by the Prime
    Minister.

    94. On even date, the Determination of titles and responsibilities
    of the Prime Minister Hon
    Peter O‘Neill, MP also changed to allow him to act as the
    Minister for Treasury that
    enabled him to sign the loan contract agreements on the same
    date.

    95. On even date, Mr Vele requested Dr Ken Ngangan, Acting Secretary
    for DoF to approve
    the payment to UBS AG in relation to the acquisition of the
    shares.

    96. On even date, Mr Rolpagarea advised the GGPNG that all
    documentations relating to the
    borrowing were in order and that Mr Vele was satisfied with the
    Terms of the Transaction
    Documents.

    97. On even date, the State and Oil Search Ltd signed and exerted
    the subscription
    Agreement.

    98. On even date, Mr Vele advised Mr Eludeme that the local and

  • Page 27 of 475

  • international financial and
    legal Advisors should be paid for services rendered.

    99. On even date, the DoT deposited K1,250,000.00 into Pacific
    Capital Ltd Managed Account
    with ANZ bank (PNG) Ltd.

    100. On even date, Hon Don Polye, then Minister for Treasury was
    interviewed at the
    Ombudsman Commission Office at Deloitte Tower, Port Moresby
    during which he stated
    that it was during his term as Treasurer that the 2014 budget was
    compiled and tabled in
    Parliament

    101. On 11 March, Mr Kamburi advised Mr Kumarasiri that the
    Certificate did not include the
    Shareholder Resolution which was signed and hence he sent an
    amended and verified
    Certificate for Mr Kumarasiri‘s signature.

    102. On even date, Minister Marape gave his approval for the NPCP to
    enter into Payment
    Direction Deed.

    103. On even date, Dr Ngangan and Mr Vele signed and approved the
    APC form to release
    AU$14,555,759.00 to be paid to the Consultants relating to the
    purchasing of Oil Search
    Ltd shares.

    Chronology of Events Page xxi

    104. On 12 March, Mr Babaga R. Naime, Acting Board Secretary for
    CSTB, advised Mr
    Rolpagarea that the CSTB awarded the Contract to both local and
    International
    Consulting Firms.

    105. On even date, Mr Eludeme certified that the inviting of tenders
    for the provision of
    financial, legal and technical advisory services was impractical
    or inexpedient.

    106. On even date, Dr Ngangan approved the application for the
    Department to complete and
    issue the APC for the above Procurement.

    107. On even date, the State, NPCP and UBS AG agreed to the terms
    and conditions upon
    signing the Payment Direction Deed that directed PNG Liquefied
    Gas Global Company

  • Page 28 of 475

  • (GloCo) to pay immediately available funds due to NPCP to UBS AG
    as per the NEC
    Decision No: 79/2014, even though at that material time the
    Kroton Act was yet to be
    certified by the Speaker of Parliament.

    108. On even date, UBS AG confirmed with Mr Vele the terms and
    conditions of the financing
    transaction that were entered into between the State and UBS AG
    in respect of Oil Search
    Ltd shares.

    109. On even date, the Prime Minster, Mr Vele, UBS AG (the
    Arranger), UBS AG (the Facility
    Agent) and UBS Nominees Pty Ltd signed the Bridge Facility
    Agreement.

    110. On even date, the GGPNG witnessed by Mr Okuk signed the
    Specific Security Deed
    (CHESS Securities – Collar) with UBS AG that provided security to
    the loan acquisition.

    111. On even date, the GGPNG, witnessed by Mr Okuk signed the
    Security Trust Deed with
    UBS Nominees Pty Ltd that provided security to the loan
    acquisition.

    112. On even date, the GGPNG, witnessed by Mr Okuk signed the
    Participant Sponsorship
    Agreement with UBS Nominees Pty Ltd.

    113. On even date, the Prime Minster, Mr Vele, UBS AG (the
    Arranger), UBS AG (the Facility
    Agent) and UBS Nominees Pty Ltd signed the Confirmation Side
    Letter.

    114. On even date, the GGPNG witnessed by Mr Okuk signed the Nominee
    Deed with UBS
    AG, UBS Nominees Pty Ltd and UBS Securities Australia for the
    Nominee (UBS Nominees
    Pty Ltd).

    115. On even date, the Substantial shareholders notice prepared and
    lodged with Port Moresby
    Stock Exchange (POMSox) and ASX lodged on 17 March 2014.

    116. On even date, the State (Subscriber) represented by the GGPNG
    witnessed by Mr Okuk
    signed the Subscription Agreement with Oil Search Limited
    (Issuer).

    117. On even date, Mr Stephen Gardiner, the Chief Financial Officer
    for Oil Search Ltd, advised
    that Goldman Sachs Financial Markets Pty Ltd with a Bank Account

  • Page 29 of 475

  • number 011-112034-
    041 was the recipient of the Subscription.

    118. On even date, Oil Search Ltd announced completion of share
    placement and file appendix
    3B, Cleansing Notice and Completion Letter.

    Chronology of Events Page xxii

    119. On 14 March, the Substantial shareholder notice prepared and
    lodged with POMSoX and
    ASX (lodged on 17 March 2014).

    120. On even date, the Commission issued directives under Section
    27(4) of the Constitution
    determined that it was necessary to issue a direction under
    Section 27(4) of the Constitution to
    freeze all further progress on the PGK3 Billion loan and
    requested for collective cooperation
    from the Prime Minister; and the members of the NEC; the Chief
    Secretary; the Minister
    for Treasury and the Minister for Finance; the Secretary, DoF;
    and the Secretary, DoT; the
    Attorney-General; and the Secretary, DJAG; the Governor of BPNG;
    Petromin; and IPBC;
    and Port Moresby Stock Exchange Limited; and Oil Search (PNG)
    Limited; and UBS
    Nominees Pty Ltd.

    121. On 15 March, the Commission wrote to Mr Vele acknowledging
    receipt of his letter dated 14
    May 2014 and advised that he will be advised on the Commission‘s
    independence and
    proceedings under Section 217(5) and (6) of the Constitution.

    122. On 20 March, Mr Rolpagarea advised Mr Naime on his legal
    opinion on the request for the
    issuance of Legal Clearance – CSTB COI 02/04 stating that the CoI
    shall only be issued
    during Natural Disaster; or Defence Emergency; or Health
    Emergency; or Civil Unrest and
    that the CoI cannot be applied retrospectively.

    123. On 26 March, during his interview with the Ombudsman
    Commission, Mr Rolpagarea
    stated that he was not given enough time to thoroughly go through
    the documents and
    that he was not present at the CSTB meeting that approved the
    issuance of the COI.

    124. On 28 March, Mr Eludeme advised Mr Vele that the State
    Solicitor declined the issuance
    of legal clearance.

  • Page 30 of 475

  • 125. On even date, Mr Kumarasiri advised the Commission that the
    IPBC gave its approval for
    NPCP to go ahead with the transaction and referred the matter to
    the Minister for Finance
    to execute.

    126. On 31 March, Hon Kua, then Attorney-General was interviewed at
    the Commission Office
    at Deloitte Tower, Port Moresby during which he stated that he
    was never present at the
    NEC meeting that made the decision to approve the borrowing, nor
    was he consulted on
    the matter.

    127. On 3 April, Mr Bakani was interviewed at the Commission Office
    at Deloitte Tower, Port
    Moresby during which he stated that the BPNG was not involved in
    the second part of the
    UBS AG loan in which the loan was obtained to purchase shares in
    Oil Search Ltd.

    128. On 10 April, Mr Eludeme advised Mr Vele that the Board
    effectively nullified the issuance
    of the COI for the engagement of private Consultants.

    129. On 11 April, Mr Sonk directed Mr Peter Graham, MD for GloCo to
    divert all distributions
    of payments payable to NPCP to be paid to UBS AG (Singapore
    Branch).

    130. On even date, Mr Sonk and Mr Wato of NPCP directed Mr Graham of
    Esso Highlands
    who was also the MD for GloCo to immediately pay all available
    funds to UBS AG.

    Chronology of Events Page xxiii

    131. On 22 April, Ashurst Lawyers advised Norton Rose Fulbright of
    Australia that non-
    compliance with payment obligations would constitute an Event of
    Default and UBS AG
    can commence enforcement processes without further reference to
    the State.

    132. On 28 April, Hon Polye reiterated to Hon Theodore Zurenuoc, the
    Speaker of Parliament,
    his position that the government‘s borrowing UBS AG loan was bad.

    133. On 30 April, Hon Polye stated to the Commission that the loan
    was an unplanned activity

  • Page 31 of 475

  • and it was not a prudent thing to do and it breached the 2014
    Budget Appropriation Bill
    and the Fiscal Responsibilities Act.

    134. On even date, Ms Tessa Hoser of Norton Rose Fulbright of
    Australia advised Mr Vele that
    in the event of a default UBS AG would charge default interest on
    any unpaid interest.

    135. On 2 May, Hon Don Polye instituted proceedings in OS 142 of
    2014 against the Hon Peter
    O‘Neill, Prime Minister, Hon Patrick Pruaitch and the State.

    136. On even date, during his interview with the Ombudsman
    Commission, Mr Vele stated
    that the State engaged UBS AG together with the other financial
    and legal firms as they
    were already providing the services.

    137. On 8 May, the National Court (Salika, DCJ) OS 142 of 2014 ruled
    that Hon Polye‘s
    application be dismissed on the grounds of abuse of process of the
    National Court rules.

    138. On 9 May, Mr Anthony Yauieb, Deputy Secretary for DoT, stated
    to the Commission that
    the NEC Policy Submission on the UBS AG Loan to purchase Oil
    Search Ltd shares was
    prepared outside by Mr Vele.

    139. On 14 May, Mr Vele advised the Commission that the State is
    required to make periodic
    interest payments to UBS AG.

    140. On even date, Finance Forms number 3 & 4 (FF3& FF4) indicated
    AU$2,261,938.36
    which is about K5,543,966.57 was paid to UBS AG.

    141. On 15 May, Mr Luke Goldsworthy and Ms Celle Raguine,
    Representatives of UBS AG
    pointed out to Mr Vele that failure to pay interest breached
    clause 5.1(b) of the Agreement
    which states that all payments to be made under the Commitment
    Documents shall be
    paid in the currency of the invoice and immediately available,
    freely transferable cleared
    funds and shall be paid without set-off or counterclaim or any
    deduction or withholding
    for or on account of tax (a ―Tax Deduction‖) unless a Tax
    Deduction is required by law. If
    a Tax Deduction is required by law to be made, the amount of the
    payment due shall be
    increased to an amount which (after making any Tax Deduction)
    leaves an amount equal

  • Page 32 of 475

  • to the payment which would have been due if no Tax Deduction has
    been required;‖

    142. On even date, Mr Vele requested clearance from Commission on
    the interest payment to
    UBS AG.

    143. On 16 May, Mr Vele instructed Mr Bakani to immediately process
    and remit funds to the
    UBS AG.

    144. On even date, Mr Vele advised Mr Bakani that interest payment
    must be paid to UBS AG.

    Chronology of Events Page xxiv

    145. On even date, Ms Betty Palaso, Commissioner-General for
    Internal Revenue Commission
    (IRC) issued a Tax Clearance Certificate to the DoT to transfer or
    remit moneys for the
    purpose of payment of interest on UBS AG Loan.

    146. On even date, a copy of the Notification (transmission) of
    Original indicated that the
    BPNG transferred AU$2,261,938.36 to the Reserved Bank of
    Australia.

    147. On 19 May, Hon Don Polye filed an application under to Section
    18(1) of the Constitution
    that in SCCOS No. 1 of 2014 to be part of the Supreme Court
    proceedings relating to the
    borrowing of the UBS AG loan.

    148. On 23 May, the Commission responded to Mr Vele‘s letter dated
    15 May 2014 and advised
    that the Commission‘s investigation into the UBS AG Loan was
    continuing and that
    Section 27(4) of the Constitution was still in force and that it
    also applied to the interest
    payments to UBS AG.

    149. On 27 May, Dr Clement Waine, Acting Secretary, Department of
    Public Enterprise (DoPE)
    explained that neither he nor his Department were involved in the
    matter been
    investigated.

    150. On 3 June, Mr Kramer stated that NPCP was involved in the
    execution of the Payment
    Direction Deed as per the IPBC Board request and direction.

    151. On 5 June, Mr Vele wrote to the Commission and stated that the
    Commission does not

  • Page 33 of 475

  • have the power to issue directives to stop such interest payments.
    To fail to make the
    interest payments would simply not be in the best interest of
    Papua New Guinea or its
    people.

    152. On even date, Mr Eludeme confirmed that CSTB approved a request
    for application for
    COI by Mr Vele.

    153. On 6 June, Mr Vele as second Plaintiff and the Hon Peter
    O‘Neill, Prime Minister as First
    Plaintiff filed proceedings in OS (JR) 383 of 2014 the National
    Court against the
    Commission and the State seeking Courts powers under Section 18(2)
    of the Constitution to
    refer questions to the Supreme Court on the Commission‘s power to
    issue Directions
    under Section 27(4) of the Constitution and Section 23 and 27(5)
    of OLDRL.

    154. On 12 June, Dr Lawrence Kalinoe, Secretary for DJAG, advised
    the Commission that
    neither he nor his Department was involved in the UBS AG Loan
    transaction.

    155. On 13 June, Hon Kua categorically denied the allegations that
    he was personally involved
    in giving clearance for the UBS AG loan and that he was not
    present in the NEC Special
    Meeting No 37/2013 that approved the UBS AG loan.

    156. On 4 July, Mr Vele advised the Commission that the UBS AG loan
    transaction was
    constitutional and had been lawfully undertaken by the State and
    its related parties in
    every aspect including the decision made over a cup of coffee at
    the Grand Papua Hotel by
    the Prime Minister, Mr Botten, Mr Aopi and Mr Vele.

    Chronology of Events Page xxv

    157. On 7 July, Mr Ilagi Veali, MPS, Secretary to the NEC forwarded
    copies of the NEC Special
    Meeting No: 08/2014 together with the list of Cabinet Ministers
    who were present or
    absent at the Special Meeting.

    158. On 27 October, Pacific Legal Group Lawyers representing the Hon
    Peter O‘Neill, Prime
    Minister and Mr Vele, mared the proceedings in OS (JR) No. 383 of

  • Page 34 of 475

  • 2014 for the Court to
    refer certain questions to the Supreme Court for interpretatin.

    159. On 3 December, the National Court granted the application by
    the Hon Peter O‘Neill,
    Prime Minister and Mr Vele and referred various questions to the
    Supreme Court for
    interpretation pursuant to Section 18(2) of the Constitution. The
    Court also ordered that the
    proceedings in OS (JR) No. 383 of 2014 be stayed.

    160. On 8 December, the Ombudsman Commission issued the Provisional
    Report to those
    implicated.

    161. On 11 December, copies of Provisional Reports were delivered to
    Hon James Marape,
    Minister for Finance, Dr. Ken Ngangan, Acting Secretary for DoF,
    Mr Dairi Vele, Acting
    Secretary DoT and Mr Loi Bakani, Governor for Central Bank.

    162. On 12 December, copies of the Provisional Report were delivered
    to Hon Peter O‘Neill,
    Prime Minister, Hon Ben Micah, Minister for State Enterprise and
    State Investments, Mr
    Philip Eludeme, Chairman of CSTB and Amb Isaac Lupari, Prime
    Minister‘s Chief of Staff.

    163. On 16 December, a copy of the Provisional Report was delivered
    to Mr Carl Okuk, legal
    consultant.

    164. On 22 December, Young & Williams Lawyers representing the Prime
    Minister Hon Peter
    O‘Neill, MP responded to the Provisional Report, refuting any
    wrong doing and that the
    Commission‘s investigations were fatally flawed. The Prime
    Minister‘s Lawyers did not
    request for an extension of time as required.

    2015
    165. On 8 January, the National Court ruled pertaining to OS No. 810
    of 2014 that the
    Constitutional question be referred to the Supreme Court and
    interim injunctions and a
    stay of proceedings on the leadership tribunal.

    166. On 22 January, Dr Ken Ngangan responded to the Provisional
    Report.

    167. On 23 January, Mr Vele, Acting Secretary, DoT responded to the
    Provisional Report.

    168. On even date, Hon Peter O‘Neill, Prime Minister made an

  • Page 35 of 475

  • application to the National
    Court seeking referral of several questions for interpretation by
    the Supreme Court under
    Section 18(2) of the Constitution.

    169. On 16 February, Mr Frank Kramer, Chairman, KPHL responded to
    the Provisional Report.

    Chronology of Events Page xxvi

    170. On 18 February, Mr Vele submitted his affidavit in the matter
    SCR No.7 of 2014 relating to
    the Special Reference by Hon Ano Pala, Minister for Justice &
    Attorney-General, MP
    before the Supreme Court.

    171. On 24 February, Mr Loi Bakani, Governor for Central Bank
    responded to the Provisional
    Report.

    172. On 25 September, Young & Williams Lawyers responded on behalf
    of Prime Minister Hon
    Peter O‘Neill, MP filed a schedule of questions and proposed
    answers to questions in
    consolidated references pursuant to Order made 11 August by the
    Bernard Sakora, J.

    173. On even date, Young & Williams Lawyers representing the Prime
    Minister Hon Peter
    O‘Neill, MP filed a Special Reference 7 of 2014 and SC References
    No. 1 and 2 of 2015
    referring 13 Constitutional questions to the Supreme Court to
    answer.

    2016
    174. On 19 July, Justice Catherine Davani of the National Court made
    reference to the Supreme
    Court under SCR No. 5 of 2016, eleven (11) questions pertaining
    to whether the OC had
    the jurisdiction to investigate the PM and whether or not the
    issuing of the OLOC
    Provisional Report ultra vires the power of the Ombudsman
    Commission.

    175. On 28 July, Justice Catherine Davani submitted Facts pertaining
    to the Supreme Court
    Reference SCR No. 5 of 2016.

    176. On 19 August, the Ombudsman Commission submitted an
    Intervention to be part of the

  • Page 36 of 475

  • Supreme Court Reference SRC No. 5 of 2016.

    177. On even date, the Prime Minister Hon Peter O‘Neill, MP
    submitted an Intervention to be
    part of the Supreme Court Reference SRC No. 5 of 2016.

    178. On 20 September, Hon Ano Pala, Attorney-General submitted an
    Intervention to be part
    of the Supreme Court Reference SRC No. 5 of 2016.

    179. On 26 September, Hon Ano Pala, Attorney-General amended his
    statement of response
    and submitted it as part of his Intervention to be part of the
    Supreme Court Reference
    SRC No. 5 of 2016.

    180. On even date, the Prime Minister Hon Peter O‘Neill, MP through
    his lawyers filed an
    injunction on the matter OS No. 15 of 2015 in the National Court.

    2017
    181. On 6 October, the Supreme Court dismissed the Supreme Court
    Reference SCR No. 5 of
    2016 made by Justice Catherine Davani and returned the matter to
    the National Court.

    182. On 15 November, the Supreme Court conclusively determined that
    the Office of the Prime
    Minister does fall within the OLOC functions of the Commission.
    There was therefore no
    utility in the current proceedings. Therefore, the court
    dismissed the entire proceedings

    Chronology of Events Page xxvii

    with costs and discharged any injunction that may have been
    issued against the
    Commission on this matter.

    RESPONSE FROM THE ACTING SECRETARY FOR TREASURY, MR DAIRI VELE

    On 23 January 2015, Mr Dairi Vele responded to the Provisional
    Report, in particular to
    the Chronology of Events section and stated the following:

    Comments

    As an initial comment on the Chronology as set out by the
    Ombudsman Commission, I say that it has
    been drafted in a way that is biased towards a finding of
    improper conduct. Many essential steps in the
    process have been completely omitted, beginning with omitting all

  • Page 37 of 475

  • Cabinet decisions in 2013
    concerning, the sourcing of advice on the IPIC Bond, including
    the creation of a Committee of which I
    was Chair to advise both IPBC and NEC on the options available
    for refinancing of the IPIC Bond and
    the retention of Oil Search shares – to omitting that the
    Ombudsman Commission refused to allow the
    State to pay interest to UBS AG pursuant to the binding
    obligations on the loan exposing the State to
    serious adverse financial consequences, and also fails to include
    that such decision of the Ombudsman
    Commission was stayed by the National Court.

    It fails to set out that at all times I sought legal advice on
    every step of the process.
    It also does not include that the initial proceedings commenced
    by Don Polye to challenge the validity
    of the loan that were dismissed, but more importantly does not
    include the commencement by Mr
    Polye of SCCOS 4 of 2014 on 15 May 2015 that seeks constitutional
    opinions of the Supreme Court on
    the application of Section 209 in these circumstances and which
    seeks to have the loan declared void
    and unenforceable against the State. These Supreme Court
    proceeding make the subject matter of this
    report subjudice the Ombudsman Commission ought to cease work on
    this investigation pending the
    outcome of SCCOS 4/14 otherwise, it is acting in content of the
    Supreme Court.
    In order to respond to this Chronology, I have reproduced the
    Chronology but have in addition
    inserted the factual events that have been omitted – these are
    highlighted and in different font for your
    ease of reference.

    1995

    1. 5 December, the Investment Promotion Authority (IPA) registered
    Pacific Capital Ltd whose
    Shareholders also include Mr Frank Michael Kramer.

    2009

    2. 5 March, the GoPNG through IPBC mortgaged its shares in Oil
    Search Ltd with International
    Petroleum Investment Company (IPIC), Abu Dhabi and acquired the
    needed funding and it financed
    the State‘s share of the capital expenditure for the PNG LNG
    project. In addition to GoPNG through
    IPBC mortgaging the Oil Search Shares, all SOEs were also
    mortgaged to secure the IPIC loan.

    In addition to GoPNG through IPBC mortgaging the Oil Search
    Shares, all SOEs were also mortgaged

  • Page 38 of 475

  • to secure the IPIC loan.
    3. 1 July, the IPA registered Pertusio Capital Partners Ltd whose
    Shareholders also include Mr Dairi Vele.

    2012

    In March, Mr. Dairi Vele ceases to be a Director and Shareholder
    of Pertusio Capital Partners Ltd.

    5 December Norton Roase Fulbright was retained by IPBC to provide
    legal advice on the IPIC Bond
    Project. The work expressly included
    Reviewing the terms and conditions of the IPIC Bond,

    Chronology of Events Page xxviii

    Reviewing and advising options available to IPBC for refinancing
    of the loan and or restructure of the
    terms of the existing loan.

    Specifically it was recognised in the scope of work that ―a
    significant aspect of this scope of work
    would involve meeting the objectives regarding the ownership of
    the Oil Search shares.

    2013
    (Omitted) 5 April 2013,
    Cabinet Decision No. 117/2013.
    On 5th April 2013, Council:
    Noted the strategic investment positive and negative implications
    of not retaining the Oil Search
    Shares currently pledged in the IPIC Bond Transactions;
    Approved for the Minister for Public Enterprise and the State
    Investments to direct the Board and
    Management of IPBC and its successive organisations to explore
    the following;
    To raise funds in the capital market (estimated to be AUD1.8
    billion) to repurchase Oil Search shares
    through the Redemption of IPIC Bonds and negotiate the best
    interest rates with favourable
    conditions to PNG to the term of the loan/bond not to exceed 10
    years but preferably at 7 years;
    IPBC should minimize cost associated with raising funds through
    direct negotiations with potential
    financier and use of IPBC Management;
    Provide appropriate security options to meet financiers security
    requirements;
    To raise funds needed for Train 3 of the PNG LNG Project
    expansion estimated to be AUD 1.2 billion;
    and

  • Page 39 of 475

  • Consider USD (United State Dollar) as a form of currency during
    the fund raising preferred by the
    financiers.
    Directed the Minister for Public Enterprise and State Investments
    and the Acting Managing Director
    for IPBC to report back to the NEC of potential financiers and
    their team sheets immediately for NEC
    approval.
    2013
    (Omitted 5th April 2013
    Cabinet Decision No. 119/2013
    On 5th April 2013, Council:
    Appointed Mr. Wasantha Kumarasiri, OBE as the Managing Director
    of IPBC and its successive
    organisation for period of four (4) years effective from the date
    of this Decision in accordance with
    Section 23 of the IPBC Act (as amended).
    Note that until the establishment of ―Kumul Petroleum Holding
    Limited‖ in line with the NEC
    decision and the appointment of its Managing Director, during the
    interim period, the Managing
    Director of IPBC shall manage all affairs necessary on Abu Dhabi
    based IPIC Transaction and any
    refinance requirements and negotiations and also oversee NPCP as
    part of the General Business Trust.
    4. 25 June, the Prime Minister Hon Peter O‘Neill, MP advised Hon
    Kerenga Kua, MP, the then Attorney-
    General that a brief –out legal services should be publicly
    tendered, which Mr. Kua failed to do for
    ANY legal brief out whatsoever during his time as Attorney-
    General.

    (Omitted) 9 July 2013
    Cabinet Decision No. 241/2013

    Chronology of Events Page xxix

    On 09th July 2013, Council:

    noted the content of Policy Submission No. 176/2013;

    noted the refinancing options presented in the submission to redeem
    the International Petroleum
    Investment Company (IPIC) Exchangeable Bonds;
    Appointed the following as members of the IPIC Exchangeable Bond
    Review Committee:

    Director, Gas Project Coordination Office – Chairman; (Mr Vele)
    Secretary, Public Enterprise – Deputy Chairman;
    Secretary, Treasury or his nominee – Member;
    State Solicitor or his nominee – Member;
    Managing Director, IPBC – Member.

  • Page 40 of 475

  • Include the following in Terms of the Reference for the Review
    Committee to look at:

    ―Bidding internationally for the engagement of international experts
    to provide up market and up to date
    advice to the Government on petroleum and gas issues‖.

    approved the Terms of Reference for Committee;

    approved to repeal clause 3 of the NEC Decision No. 119/2013 in its
    entirety;

    Directed the Minister for Public Enterprise and State Investments to
    take carriage of all matters pertaining
    to the redemption of IPIC Exchangeable Bond and the retention of Oil
    Search Shares and that this NEC
    Decision supersedes all previous NEC Decisions, namely NEC Decision
    117/2013 or such other decisions
    pertaining to the IPIC Bond issue; and

    Directed that the IPIC Exchangeable Bond Review Committee reports
    its findings back to the Minister for
    Public Enterprise and State Investments before 31st August 2013 with
    a clear path towards completing IPIC
    Exchangeable Bond transaction.

    The Terms of Reference for the IPIC Exchangeable Bond Review
    Committee were as follows:

    ―Under the Direction of the Minister of Public Enterprise and State
    Investments, Hon Ben Micah, MP, and
    the Chairman of Dr. Thomas Webster, Chairman IPBC, the Committee is
    directed to:

    Meet as required by the Chairman to consider and review proposals
    for the State to refinance the IPIC
    Exchangeable Bond.

    The chairman is to report the final recommendation of the Committee
    to the Minister by 31 August 2013.

    All information you require with regard to the original IPIC
    funding, other related matters and the current
    position and negotiations with IPIC are to provide to the Chairman
    of the Committee immediately on
    request of any relevant party.

    Proposals must meet the following requirements:
    4.1 The amount to be raised is estimated to be AU$1.681B plus
    interest of approximately another
    AU$84M.

    4.2 If the Oil Search shares are to be used as collateral for new

  • Page 41 of 475

  • funding, those shares are to be secured
    as a stand-alone asset and are not be conditional on any
    other asset.

    4.3 As stand-alone security, Oil Search equity must be the only
    security available for any proposal
    which includes the Oil Search equity on a basis which has no
    recourse to any other asset.

    4.4 For any cash flow security component in any proposal,
    security recourse is to be the cash flow
    above. No security other than the potential cash receipt is
    available. Where cash flow is monetised
    or securitised by a lender, the control or de facto ownership
    of the underlying asset is not available
    to the lender.

    4.5 The underlying control interest of Oil Search shares must be
    vested with IPBC and all dividends
    during the term of the refinance transaction must be paid to
    IPBC.

    4.6 Neither the whole of nor any part of NPCP‘s equity is
    available to support the refinancing. NPCP‘s
    equity is not available as security or for sale nor will any
    dilution of its current equity to any party

    Chronology of Events
    Page xxx

    to be accepted except the 4.20% mandatory acquisition by
    landowner company as provided under
    the benefit-sharing arrangements.
    4.7 First interest payment should not be earlier than December
    2015 to align and prepare with cash
    inflows from PNG LNG Project.

    4.8 No State guarantee should be a condition requirement.
    4.9 Transaction fees on success must be kept at minimal or zero
    if possible.

    4.10 Meet Regulatory Transaction Certification requirements
    through Certified Agent in the
    appropriate Financial Markets complying post Global
    Financial Crisis (GFC) Financial Transaction
    Regulatory Requirements.

    5. Timing of finalising this refinancing is critical. A
    successful proposal must demonstrate funding to
    be complete after the 31 August, which absolute certainty.

    As Chairman of the IPIC Exchangeable Bond Review Committee,

  • Page 42 of 475

  • under the direction of IPBC, Mr. Vele
    utilised the services of Norton Rose Fulbright in accordance
    with their retainer by IPBC for the purposes
    of the achievement of the Committee‘s Terms of Reference.

    5. 6 August, the National Executive Council appointed Mr. Dairi
    Vele, as the Acting Secretary for
    Department of Treasury (DoT).

    8 August, a recommendation by Gas Office and Chairman of the
    IPIC Exchangeable Bond Review
    Committee that Financial Advisers be appointed and position/
    discussion paper drafted by Mr. Vele.

    6. 12 August, the DoT officials Mr. Vele, in his capacity as IPIC
    Exchangeable Bond Review Committee
    Member and Acting Secretary for Treasury and met with Union Bank
    of Switzerland,
    Aktiengesellschaft, Australia Branch (UBS AG) officials at
    Sydney, Australia.

    15. 13 August, the DoT officials Mr. Vele, in his capacity as IPIC
    Exchangeable Bond Review Committee
    Member and Acting Secretary for Treasury met with Morgan Stanley
    officials in Sydney, Australia.

    16. 14 August, the DoT officials Mr. Vele, in his capacity as IPIC
    Exchangeable Bond Review Committee
    Member and Acting Secretary for Treasury met with JP Morgan
    officials at Sydney, Australia.

    17. 15 August, the DoT officials Mr. Vele, in his capacity as IPIC
    Exchangeable Bond Review Committee
    Member and Acting Secretary for Treasury held a second meeting
    with UBS AG officials at Sydney,
    Australia.

    7. 16 August, the DoT officials Mr. Vele, in his capacity as IPIC
    Exchangeable Bond Review Committee
    Member and Acting Secretary for Treasury met with Credit Suisse
    officials at Sydney, Australia.

    8. 19 December 2013, the National Executive Council (NEC) during a
    Special Meeting No: 37/2013 in its
    Decision No: 479/2013 noted the submission that UBS AG was the
    preferred financial adviser and
    arranger by IPBC and the IPIC Committee but approved and
    directed that the BPNG provide final
    evaluations on the proposals to be obtained from Citi Bank and
    UBS AG to re-finance the International
    Petroleum Investment Company (IPIC) Exchangeable Bond and to
    retain the interest of the State in
    Oil Search.

  • Page 43 of 475

  • 12. 20 December, Hon Ben Micah, MP, Minister for State Enterprises
    and State Investment (SE&SI) wrote
    to Mr Loi Bakani, the Governor of Bank of Papua New Guinea
    (BPNG) and requested the BPNG to
    evaluate the potential financiers‘ proposals to re-finance the
    IPIC Exchangeable Bond.

    13. 22 December, Mr Bakani advised Minister Micah that the four
    financiers should have been provided all
    the information and requested to bid for the Exchangeable Bond
    re-financing facility.

    14. 27 December, Minister Micah requested Mr Bakani for
    clarification on the BPNG‘s advice.

    2014

    Chronology of Events Page xxxi

    15. 7 January, Mr Bakani advised Minister Micah that the State re-
    negotiate the funding structure of the
    proposals with the two Financiers the UBS AG and Citi Bank.

    16. 9 January, Mr Bakani forwarded the BPNG‘s recommendations to
    Minister Micah as requested.

    Mr Bakani requested the Prime Minister to allow the BPNG the
    mandate to assist the State in meeting
    the basic re-financing requirements in the negotiation process.

    17. 14 January, Mr Wasantha Kumarasiri for Independent Public
    Business Corporation (IPBC), requested
    Mr Bakani to correct his advice to Minister Micah as it was
    incorrect and misleading.

    18. 15 January, Minister Micah wrote to Mr Bakani and requested that
    the BPNG provide its final
    recommendations on the two Banks, UBS AG and Citi Bank.

    19. 16 January, Mr Bakani requested all parties including the BPNG,
    Minister Micah, IPBC, and the DoT to
    draft the Terms of Reference to be used during negotiations with
    potential Financiers.

    20. 17 January, Mr Bakani wrote to and advised Mr Kumarasiri that
    the BPNG‘s evaluations and
    recommendations were based on information provided in accordance
    with the NEC Decision No:
    479/2013 in its Special Meeting No: 37/2013.

  • Page 44 of 475

  • Mr Bakani requested Ms Natalie Yacoubian of PNP Paribas to
    resubmit PNP Paribas proposal
    incorporating the refined terms.

    Mr Bakani requested Mr Mitchell Turner of UBS AG to resubmit UBS
    AG proposal incorporating the
    refined terms.

    Mr Bakani requested Mr Philip Graham to resubmit Citi Bank‘s
    proposal incorporating the refined
    terms.

    Minister Micah advised Mr Bakani that he expected a
    recommendation by Wednesday 22 January
    2014.
    21. 23 January, Mr Bakani recommended to the NEC to request the Abu
    Dhabi Government for an
    extension of six months, to allow time to improve on the
    proposal by BNP Paribas, the superior
    proposal, as well as the UBS AG, Citi Bank and ANZ/Barclays.

    22. 27 January, Hon Don Polye, Minister for Treasury wrote to Mr
    Bakani and requested for a full brief on
    the implementation of the NEC‘s Decision No. 479/2013 regarding
    the re-financing of IPIC
    Exchangeable Bond.

    23. Even though the BPNG‘s assessment on the four proposals was
    inconclusive, Mr Bakani, however,
    recommended the UBS AG over BNP Paribas to Minister Micah to
    refinance the IPIC Exchangeable
    Bond.

    24. 30 January, Mr Bakani wrote to the Director of Investment
    banking UBS AG regarding the re-financing
    of the IPIC Loan and advised that the State accepted its
    proposal to re-finance the IPIC Loan and
    advised that the State accepted its proposal to re-finance the
    IPIC Exchangeable Bond by a combined
    structure of a Rollover Collar and term Loan. Mr Bakani also
    requested the UBS AG to confirm in
    writing its commitment to fund the AUD$1.7 Billion IPIC
    Exchangeable Bond.

    30 January, Mr Vele engaged UBS AG to act as the sole Financial
    Advisor and Lead Arranger, in
    relation to the management of the investment of the State in Oil
    Search Ltd. This is completely
    incorrect. Mr Vele did not engage UBS AG on 30 January 2014 or
    any other time prior to 6 March 2014.
    UBS AG were only actually engaged by the State following Cabinet
    Decision no 79/2014. Following the
    advice from BPNG that the State had accepted UBS AG proposal, as

  • Page 45 of 475

  • essentially project manager of the
    IPIC Bond matter, Mr Vele commenced negotiations and dealing
    with UBS AG, but their retainer was
    contingent on the Cabinet Decision of 6 March 2014.
    Mr Bakani informed the Directors for Investment Banking, UBS AG
    that the State had accepted its
    proposal to re-finance IPIC Exchangeable Bond worth AU$1.7
    Billion.

    Chronology of Events Page xxxii

    Minister Micah noted Mr Bakani‘s recommendations but he advised
    that the six months extension
    recommended would incur costs and was not possible.
    25. 3 February, Minister Micah informed Mr Frank Kramer, Chairman
    for National Petroleum Company of
    PNG Ltd (NPCP) Board regarding the Exchangeable Bond and the
    appointment of UBS AG.

    Hon Minister Micah accepted the BPNG‘s recommendations and the
    NPCP‘s lead to re-finance IPIC
    Exchangeable Bond process on behalf of the Independent State of
    Papua New Guinea (State).

    26. 4 February, the Prime Minister advised HH Sheik Mansour bin
    Zayed Al Nahyan that the State
    wanted to retain its shares in Oil Search Ltd.

    27. 7 February, Mr Bakani re-assured Minister Micah on its
    recommendation to use UBS AG to re-finance
    IPIC Exchangeable Bond.

    28. 13 February 2014, team of Foreign Affairs Minister, Governor of
    BPNG, Acting Secretary for Treasury,
    representatives of UBS, Peter Botten of Oil Search and Anthony
    Latimer of Norton Rose Fulbright
    prepared to travel to Abu Dhabi commencing 15 February to return
    on 20 February to meet with IPIC
    leaders in relation to the Bond and Shares as no indication had
    been given as to the method of re-
    payment preferred to retain the Oil Search Shares.

    13 February, a Mandatory Exchange Notice to Deutche Bank AG,
    London Branch (Exchange Agent)
    indicated that the IPIC did not want to sell its shares to
    Government of Papua New Guinea (GoPNG).

    Mr John Leahy, Head of Business Assurance & Asset Serving,
    National Nominees Limited, consented
    and became a member of Oil Search Ltd and undertook trading of
    Shares on the Australian Stock
    Exchange.

  • Page 46 of 475

  • Consideration was given by the State team that other methods of
    acquiring shares in Oil Search
    needed to be explored, to replace the shares to be retained by
    IPIC.

    Market rumours were of a placement of Shares by Oil Search to
    raise capital to purchase an interest in
    the Elk Antelope Project and if this happend post purchase the
    share price would rise significantly and
    it would be much more expensive for the State to buy shares from
    the market. The Oil Search share
    price was very closely linked to projects they had under
    development. If a share purchase was to be
    done by the State it therefore needed to be done from the share
    placement or before the share
    placement – it was a commercial reality that time was of the
    essence.

    20 February 2014, Mr Vele and Mr Latimer meet with UBS AG in
    Sydney to discuss whether UBS AG
    could give an indication whether they would agree to provide
    funding to purchase part of a share
    placement by Oil Search, as any submission to NEC would need to
    have some Certainty that funding
    would be available to purchase the Oil Search shares.
    20 February 2014, Mr Vele seeks instructions from Prime Minister
    Hon Peter O‘Neill, MP as to
    whether the State would consider buying a placement of shares
    from Oil Search given IPIC was to
    retain the State‘s shares in Oil Search and the Prime Minister
    Hon Peter O‘Neill, MP instructed that it
    was a NEC decision to retain shares in Oil Search so Mr Vele
    should proceed to put together a draft
    deal to be considered by NEC.
    21 February 2014, Mr Vele met with Mr Botten in Sydney and
    advised that the State may be interested
    in buying shares in Oil Search and asked for the State to be
    informed of any plans to issue additional
    shares and informs Botten that the State would be able to obtain
    funding from UBS AG.
    21 February 2014, Mr Vele in constant communication with Prime
    Minister Hon Peter O‘Neill, MP for
    instructions.
    21 February, Oil Search share price was AU $8.46.
    22 February 2014, Mr Botten flies to Papua New Guinea and seeks
    to meet with Prime Minister Hon
    Peter O‘Neill, MP and does meet with the Prime Minister and has
    preliminary discussions about price
    but the Prime Minister informs Mr Botten that any specific
    negotiations must be done with Mr Vele as
    he was preparing the draft deal.

    Chronology of Events Page xxxiii

  • Page 47 of 475

  • 23 February 2014, Mr Vele returns to Papua New Guinea.
    29. 23 February, the Prime Minister, Hon Peter O‘Neill, MP, Mr Peter
    Botten, MD of Oil Search Ltd, Mr
    Gerea Aopi, Board Chairman for Oil Search Ltd and Mr Vele met at
    Grand Papua Hotel and decided for
    the State to buy 149, 390, 244 shares which translated to 10.01
    % shareholding in Oil Search Ltd. and
    discussed the availability of a placement of Oil Search shares.
    There was a discussion on price but the
    Prime Minister advised Mr Botten to speak to Mr Vele about price
    in further negotiations to take
    place. The Prime Minister and Mr Vele expressed to Oil that the
    State had an interest in buying Oil
    Search Shares. No agreement or commitment was made on behalf of
    the State, the share price was not
    settled on and it was the position negotiations would be ongoing
    before a submission would be put to
    NEC.

    30. 24 February, Hon Rimbink Pato, MP, Minister for Foreign Affairs
    and Immigration (FAI) advised HH
    Sheikh Abdullah bin Zayed Al Nahyan, the Minister for FAI, Abu
    Dhabi, United Arab Emirates, that
    the GoPNG wanted to retain ownership of the Oil Search Ltd
    shares.

    24 February 2014, Mr Botten and Mr Vele have numerous
    discussions on a possible price that the State
    could pay. Mr Botten informed that Oil Search wanted $8.50 per
    share and that although they could
    discuss a price, any proposed price would have to be put to the
    Board of Oil Search. Mr Vele advised
    Mr Botten that he would need to speak to the Prime Minister
    about the price and then any proposed
    deal would need to be put to and approved by cabinet.
    24 February 2014, Mr Vele met with the Prime Minister Hon Peter
    O‘Neill, MP and the Prime Minister
    instructed that the State would only be prepared to pay AUD$8.20
    per share as that was the price Mr
    Botten had indicated on 22 February 2014.
    24 February 2014, Mr Vele advises Mr Botten that he had been
    instructed that the State would only
    consider a price of $8.20.
    24 February 2014, UBS AG advised that $8.20 was an unrealistic
    price and that the State would need
    to pay $8.50 a share but Mr Vele stated he had a clear
    instruction that $8.20 was the price the State
    would consider paying.
    31. 25 February 2014, UBS AG write to Mr Vele and outlined the
    proposed terms of engagement including
    fees charged in relation to the role as financial advisor and
    lead arranger as well as financial modelling.

  • Page 48 of 475

  • 25 February, UBS AG wrote to Mr Vele and outlined the terms of
    engagement of UBS AG as the Sole
    Financial Advisor and Sole Lead Arranger that was effected on 30
    January 2014, in relation to the
    management of the investment of the State in Oil Search Ltd and
    associated matters flowing from the
    issuance in 2009 of Exchangeable Bond in respect of the State‘s
    196.6 million shares in Oil Search Ltd
    to the IPIC of Abu Dhabi. These terms were agreed to when the
    GGPNG signed the document that
    was witnessed by Mr Okuk.
    Trading in Oil Search Ltd shares halted ahead of its
    announcement issuing shares to existing
    shareholders and interested buyers.
    His Excellency Grand Chief Sir Michael Ogio, G.C.L, G.C.MG,
    K.St.J the Governor-General of Papua
    New Guinea (GGPNG) signed the document agreements which were
    witnessed by Mr Carl Okuk as a
    Commissioner for Oath witnessing the agreement on the terms and
    conditions of engagement of UBS
    AG.
    32. 26 February, Prime Minister wrote to Mr Botten regarding the
    State‘s willingness to buy shares in Oil
    Search Ltd.

    26 February 2014, KPMG was brought in to review the terms
    offered be UBS AG to make sure that the
    offer was on proper commercial terms. No retainer agreement was
    given to KPMG as they were aware
    their advice was only relevant as part of the draft deal if
    approved by NEC, but it was essential that
    figures were checked prior to a NEC submission.
    26 February 2014, advice was being provided on legal matters
    from Norton Rose Fulbright as a result
    of their retainer by IPBC. As Acting Secretary for Treasury Mr
    Vele was still a member of the IPIC
    Bond Committee and that was under the direction of IPBC.

    Chronology of Events Page xxxiv

    Mr Vele was not receiving advice from the State Solicitor as Mr
    Vele was informed he was busy and a
    derivative transaction of this type was complicated not something
    that the State Solicitor had any
    experience in or expertise and therefore the State required
    specialist advice. Norton Rose Fulbright
    retained Pacific Legal Group as their local counsel to assist in
    Papua New Guinea. The State did not
    retain Pacific Legal Group.
    26 February 2014, as Ashurts were the local Counsel of UBS AG
    they drafted documents relevant to the

  • Page 49 of 475

  • proposed deal, but on the basis that Cabinet was still to approve
    the transaction. They were retained
    by UBS AG and not the State.
    26 February 2014, UBS AG and Oil Search enter into separate
    underwriting agreement whereby if the
    State through Cabinet did not approve and go through with the
    deal to buy Oil Search Shares, then
    UBS AG could buy the Oil Search Shares for their own investment
    purposes.
    33. 27 February, four days after the meeting, the Prime Minister
    wrote to Mr Guy Fowler, the MD for UBS
    AG proposal to provide funding facilities to the State in
    connection with the subscription by the State
    for approximately 149.39 million shares Ltd at AU$8.20 per share.

    27 February 2014, Mr Vele receives a commitment letter from UBS
    AG regarding the Oil Search shares
    loan.
    Subscription Agreement was signed between UBS AG (the Equity
    Derivative Financier) and Oil Shares
    Limited.
    Oil Search Ltd shares trading were suspended ahead of its
    announcement.
    Oil Search Ltd announced that it had agreed to acquire a 22.835%
    gross interest in PRL 15 (Elk
    Antelope) from the Pac LNG Group Companies for US$900 million to
    be funded through a placement
    of new shares to the State.
    UBS AG forwarded a Commitment Letter that was signed by the GGPNG
    which was witnessed by Mr
    Okuk.
    28 February 2014, Consolation between Mr Vele as Secretary for
    Treasury and in his capacity as
    member of IPIC Exchangeable Bond Review Committee and BPNG being
    the Governor and Dr Jakob
    Weiss on the terms and conditions of the UBS AG proposal. Paddy
    Jike of UBS AG was available at the
    meet to assist. The proposal for the loan to purchase Oil Search
    shares on market that UBS was making
    was not substantially different to what had previously been
    proposed in their previous advice
    regarding refinancing the IPIC loan. The terms and conditions
    therefore cannot in any way be said to
    be prejudicial to the State.
    28 February 2014, both Treasurer and Prime Minister were updated
    regularly by Mr Vele as to the
    meetings and negotiations.
    34. 4 March, Ashurst Lawyers forwarded draft documents for its
    client UBS AG to the State that outlined
    the financial package that UBS AG was offering the State.

    Mr David Heathcote of KPMG presented KPMG‘s analysis on the
    monetised collars relating to
    financing the purchase of Oil Search Ltd shares.

  • Page 50 of 475

  • 35. 5 March, Mr Fowler requested the Prime Minister to intervene in
    resolving the IPIC Exchangeable
    Bond, PNG LNG direction-to-pay and Sovereign Bond take-out of the
    Bridge Loan.

    5 March 2014, which was as soon as the documents were provided to
    Mr Vele from the Counsel to UBS
    AG being Ashursts, Mr Vele requested Mr Daniel Rolpagarea, the
    State Solicitor to give legal clearance
    on the documents relating to the transaction for the State to
    acquire 149,390,244 shares in Oil Search
    Ltd.

    Mr Rolpagarea requested Mr Vele to provide to him details of
    confirmation and clear instructions on
    the engagement of Pacific Legal Group and the breach of Section
    209 of (Parliament Responsibility) of
    the Constitution by the NEC. This is incorrect. Mr Rolpagarea
    actually noted
    Correctly that the documents were delivered to his office by
    Pacific Legal Group

    Chronology of Events Page xxxv

    Incorrectly that Norton Rose Fulbright and Pacific Legal Group
    had been retained by Mr Vele or by Treasury
    (NRF had been retained by IPBC and PLG had been retained by NRF)

    Correctly that the documents required his urgent consideration
    and issuance of the legal clearance to NEC‘s
    consideration if appropriate

    Correctly the NEC‘s decision and background information and the
    State‘s intention to acquire a 10.1% interest in
    Oil Search

    And advised Mr Vele that
    The documents are a reflection of the State‘s negotiated position
    and as such are acceptable to the State.

    That the documents which were Minutes and Certificates that were
    not as yet signed by representative
    individuals or Company Boards were in order for Mr Vele to
    facilitate such signatures and/or Board meetings.
    (This includes IPBC Board meeting minutes, the IPBC shareholders
    resolution and the NPCP minutes and POA –
    Mr Vele forwarded these documents to IPBC on the express advice
    and clearance of the State Solicitor contrary to
    OC assertions of wrongdoing)

    And Commented
    That his advice was that many recommendations for NEC approvals

  • Page 51 of 475

  • require approvals/authorisations specifically
    from the State agencies acting independently but taking into
    account the NEC decision and advised further that
    the relevant approvals should be sought by Mr Vele from the
    State‘s relevant agencies after NEC consideration
    and approval of the financing transactions, including
    recommendation of the COI from CSTB

    That Section 209 of the Constitution required parliament‘s
    approval for the Bridge and Collar loans and advised
    that Mr Vele take the appropriate steps to facilitate the process

    That Mr Vele may proceed to NEC taking into account his advice

    That after NEC approval, Mr Rolpagarea would then prepare an
    advice to the Head of State to execute the
    transaction documents.

    NPCP Board Chairman submitted a proposal to the IPBC Board
    advising of the State‘s acquisition of
    149,390,244 shares in Oil Search Ltd and that UBS AG required
    NPCP to enter into a payment
    direction between NPCP, PNGLNG Global Company LDC (GloCo).

    Mr Rolpagarea advised Mr Vele that the NEC Submission needed
    approvals from the relevant
    Agencies‘ Boards and the Parliament for the Bridge and Collar
    loans totalling AU$1.239 Billion and that
    Mr Vele was to facilitate the said approvals after the NEC
    decision.

    36. 6 March, the UBS AG issued a Bridge Takeout Letter to Mr Vele
    that outlined the terms of the fees
    payable to UBS AG as Facility Agent under the Bridge Facility
    Agreement that was signed by the
    GGPNG and witnessed by Mr Okuk.

    The UBS AG as the Facility Agent for the loan wrote to Mr Vele
    and requested for the State to pay
    the Facility Agent fees as per the Bridge Facility Agreement that
    was signed by the GGPNG and
    witnessed by Mr Okuk.

    UBS AG as the Security Trustee for the loan wrote to Mr Vele and
    requested for the State to pay the
    Security Trustee fees as per the Bridge Facility Agreement that
    was signed by the GGPNG and
    witnessed by Mr Okuk.

    The Prime Minister submitted an NEC Policy paper No: 67/2014 to
    the NEC.

    The NEC in its Decision No: 79/2014
    Noted the transaction documents, approved Petromin as the

  • Page 52 of 475

  • eventual subscriber but that the State
    would be the initial subscriber, noted the certificate of
    correctness from the State Solicitor and
    confirmed the authority of the Minister for Treasury to finalise
    any documents that were not included
    in the cabinet submission prior to submission of the transaction
    documents to the Head of State for
    Execution,

    approved to advise the Head of State to approve the borrowing for
    the purchase of shares and to execute the
    transaction documents for the State.

    Chronology of Events Page xxxvi

    approved to advise the Minister for Treasury to sign such
    documents, instruments and certificates as the
    transaction required. He was not given the discretion to refuse
    to sign by Cabinet. It was a Cabinet decision to go
    ahead with the transaction and he was to implement parts of that
    decision.

    noted other approvals were required from other State Agencies
    and endorsed all of them including but not limited
    to a Certificate of Inexpediency be issued by CSTB, an authority
    to pre-commit by the Secretary for Finance and a
    certificate by the Secretary for Treasury certifying the extent
    of overseas commercial debt, execution of a payment
    deed by NPCP, and the payment direction by IPBC.

    noted that the approval by Cabinet was specifically to cover any
    processes that had to occur either before or after
    the decision by Cabinet so that the transaction could proceed in
    a commercial time frame.

    This distribution list of the Cabinet Decision included the
    Minister for Justice and Attorney-General, the Minister
    for Treasury, the Minister for Public Enterprises, the Minister
    for Finance, the Departments of Finance, Treasury,
    Justice & Attorney-General, IPBC, the State Solicitor, BPNG,
    NPCP and Petromin.

    Mr Polye was present throughout the NEC Meeting and during the
    making of NEC Decision 79/2014

    On 5 March 2014 (and not on 6 March 2014) Mr Vele advised
    Minister Polye that the loan would not
    affect the State‘s debt program and that Petromin would be the
    eventual subscriber and nominee and
    Mr Vele explained why it was considered it to be in the best

  • Page 53 of 475

  • interests of the State. Mr Vele explained
    that usually there is an equity cushion which is needed in order
    to secure borrowings. As the State was
    the only equity that could get an equity cushion, it was the
    only entity that could secure the $300
    million bridging loan. Therefore Mr Vele advised him that it was
    not possible in the first instance for a
    State owned entity like Petromin or ICPC to secure the loan but
    that it could be transferred to them at
    a later time, but within the financial year. The Treasurer said
    to Mr Vele that, he was concerned that
    the loan would be in breach of debt to GDP ratios. Mr Vele
    explained to Mr Polye that this could only
    be determined at the end of the 2014 financial year and that
    there were provisions to correct any such
    issues in the 12 month period after the end of the financial
    year. Nonetheless the Treasurer was explicit
    that he wanted the transaction off the balance sheets. This was
    simply not possible, however.
    Petromin however would have been unable to secure funding in its
    own right but rather would need
    the State to secure the loan and then transfer it to Petromin.
    UBS had made it quite clear to Mr Vele
    that they would not loan directly to Petromin in relation to the
    bridging loan.

    Mr Vele requested Mr Philip Eludeme, the Chairman for CSTB to
    approve the request for COI at the
    earliest to cover the advisory costs, in accordance with and for
    the purposes of implementing Cabinet
    Decision No 79/2014.

    Prime Minister advised the GGPNG, that the NEC approved the
    borrowing of a loan for the purpose of
    purchasing shares in Oil Search Ltd and for the purpose of
    meeting the expenses of the borrowing
    itself.

    Mr Okuk representing Mr Vele delivered 28 documents pertaining
    to the UBS AG loan to Mr
    Rolpagarea for his legal clearance.

    37. 7 March, Mr Vele explained to Mr Eludeme that the COI was needed
    to access funds to pay for fees
    pertaining to the State‘s acquisition of the shares in Oil
    Search Ltd, in accordance with and for the
    purposes of implementing Cabinet Decision No 79/2014.

    Mr Vele requested Mr Rolpagarea to issue legal clearance on the
    submission regarding the State‘s
    borrowing of loan arrangements, in accordance with Mr
    Rolpagarea‘s advice of 5 March 2014 and in
    accordance with and for the purposes of implementing Cabinet
    Decision No 79/2014.

  • Page 54 of 475

  • The Prime Minister Hon Peter O‘Neill, MP informed IPBC of the
    government‘s decision to enter into
    the agreement, in accordance with and for the purposes of
    implementing Cabinet Decision No 79/2014.

    Mr Isaac Lupari, the Chief of Staff to the Prime Minister,
    advised Mr Kumarasiri that the NEC
    approved the State‘s intent to borrow from UBS AG to fund its
    acquisition of shares in Oil Search Ltd,
    in accordance with and for the purposes of implementing Cabinet
    Decision No 79/2014.

    Minister Micah directed the Board of IPBC to approve the Payment
    Direction Deed and to sign the
    Payment Direction Deed on or before 09 March 2014, in accordance
    with and for the purposes of
    implementing Cabinet Decision No 79/2014.

    Chronology of Events Page xxxvii

    38. 8 March, Mr Vele requested Dr Thomas Webster, the then Chairman
    for IPBC Board, to progress the
    documents to the IPBC Board for its consideration and approval in
    accordance with Mr Rolpagarea‘s
    advice of 5 March 2014 and in accordance with and for the
    purposes of implementing Cabinet Decision
    No 79/2014.

    Mr Kumarasiri advised Dr Webster to issue instructions to the
    management of IPBC Management to
    prepare documents in anticipation to receive requests from the
    Board of NPCP with their resolutions,
    in accordance with and for the purposes of implementing Cabinet
    Decision No 79/2014.
    39. 9 March, Mr Erastus Kamburi, the Chief Legal Officer for IPBC,
    requested the IPBC Directors to meet
    and discuss on the directives from the Minister Micah and Mr
    Lupari and the NEC Decision No:
    79/2014, in accordance with and for the purposes of implementing
    Cabinet Decision No 79/2014.

    An Explanatory Note was prepared with the Board Circular
    Resolution outlining the purpose of the
    Special Board Meeting.
    The NPCP Special Board of Directors Meeting No: 02/2014 resolved
    that the Company enter into any
    Transaction Document to give effect to the Payment Direction Deed
    and authorised Mr Sonk and Mr
    Wato with the Power of Attorney in accordance with Mr
    Rolpagarea‘s advice of 5 March 2014 and in

  • Page 55 of 475

  • accordance with and for the purposes of implementing Cabinet
    Decision No 79/2014.
    The NPCP Board empowered Mr Sonk and Mr Rogen Wato, the Company
    Secretary for NPCP with
    the Power of Attorney in accordance with Mr Rolpagarea‘s advice
    of 5 March 2014 and in accordance
    with and for the purposes of implementing Cabinet Decision No
    79/2014.
    Mr Sonk verified copies of the Shareholder resolutions of the
    NPCP dated 09 March 2014, Minutes of a
    Meeting of the Board of Directors and Power of Attorney of the
    NPCP in accordance with Mr
    Rolpagarea‘s advice of 5 March 2014 and in accordance with and
    for the purposes of implementing
    Cabinet Decision No 79/2014.
    Mr Wapu Sonk, Managing Director for NPCP forwarded to Mr
    Kumarasiri an Extract of the Board
    Meeting Minutes.
    Mr Rolpagarea advised Mr Vele that the Treasurer was the
    authorised person to execute loan
    agreements on behalf of the State strictly in accordance with
    Section 2(7) of the Loans (Overseas
    Borrowing) (No.2) Act 1976. Section 209 (Parliament
    Responsibility) of the Constitution [VERY
    IMPORTANT Mr Rolpagarea did not mention Section 209 (Parliament
    Responsibility) of the
    Constitution in that sentence or context – this is wrong].
    Norton Rose Fulbright wrote to the GGPNG and the Minister for
    Treasury regarding financing of the
    acquisition of the shares and possible options to re-finance
    following completion.
    Mr Kumarasiri wrote to Hon James Marape MP, Minister for Finance
    and requested him to approve
    the Memorandum of Approval to enable NPCP to enter into the
    Transaction Documents in accordance
    with Mr Rolpagarea‘s advice of 5 March 2014 and in accordance
    with and for the purposes of
    implementing Cabinet Decision No 79/2014.
    Minister Polye advised Mr Vele that he will not sign the
    documents that enabled the State to borrow
    the said UBS AG loan contrary to the NEC Decision No 79/2014 of
    which he was a part.
    Minister Marape approved the Memorandum of Approval that enabled
    NPCP to enter into the
    Transaction Documents in accordance with Mr Rolpagarea‘s advice
    of 5 March 2014 and in accordance
    with and for the purposes of implementing Cabinet Decision No
    79/2014.
    Mr Rolpagarea advises GGPNG to sign transaction documents.
    The GGPNG signed the document enabling the State to borrow AU$335
    million from UBS AG for the
    purpose of the purchase of shares in Oil Search Ltd and for the
    purpose of meeting the expenses of the
    Borrowing and for the services of the State, in accordance with

  • Page 56 of 475

  • Mr Rolpagarea‘s advice of 5 March
    2014, his advice following the Cabinet meeting and in accordance
    with and for the purposes of
    implementing Cabinet Decision No 79/2014.

    Chronology of Events Page xxxviii

    40. 10 March, IPBC Board resolved that NPCP Directors enter into the
    Transaction Documents and
    recommend to the Minister for Finance to approve a proposal by
    NPCP to enter into Agreement to
    execute all documents that gave effect to the Payment Direction
    Deed.

    The NPCP Board deliberated and resolved and authorised Board to
    enter into Agreement to execute
    the Transaction Documents.

    Mr Eludeme advised Mr Vele that the CSTB resolved and approved
    the issuance of the COI for the
    awarding of contracts to both local and international Consulting
    Firms, in accordance with the PFMA
    1995 and in accordance with Cabinet Decision No79/2014.

    Mr Rolpagarea advises Mr Vele that the GGPNG and Minister for
    Treasury were to execute the
    transaction documents to purchase Oil Search Ltd shares on behalf
    of the State.

    Mr Vele confirmed with Mr Rolpagarea that the GGPNG and Minister
    for Treasury were to execute
    the transaction documents to purchase Oil Search Ltd shares on
    behalf of the State.
    Mr Kumarasiri certified the Circular Resolution of the Board of
    Directors of IPBC that authorised the
    execution of the Payment Direction Deed by NPCP.
    Mr Kumarasiri wrote a Memorandum of Recommendation recommending
    Minister Marape to approve
    the NPCP to enter into the Transaction Documents.
    Following discussion between the Prime Minister and Mr Polye, the
    Prime Minister decommissioned
    Hon Polye as the Minister for Treasury.
    Hon Polye accepted his decommissioning as Minister for Treasury
    by the Prime Minister Hon Peter
    O‘Neill, MP. This is incorrect. Mr. Polye challenged his
    decommissioning in the National Court – in
    proceedings as OS No. 142 of 2014 filed 25 March 2014. They were
    dismissed however on 8 May 2014.
    The National Gazette No: G83 and G89 of 10 March 2014 confirmed
    the decommissioning and
    replacement of Hon Polye as the Minister for Treasury by the

  • Page 57 of 475

  • Prime Minister.
    The Determination of titles and responsibilities of the Prime
    Minister also changed to allow him to act
    as the Minister for Treasury.
    Mr Vele requested Dr Ken Ngangan, Acting Secretary for DoF to
    approve the payment to UBS AG in
    relation to the acquisition of the shares, in accordance with Mr
    Rolpagarea‘s advice of 5 March 2014,
    his advice following the Cabinet meeting and in accordance with
    and for the purposes of
    implementing Cabinet Decision No 7/2014.
    Mr Rolpagarea advised the GGPNG that all documentations relating
    to the borrowing were in order
    and that Mr Vele was satisfied with the Terms of the Transaction
    Documents.
    The State and Oil Search Ltd signed and exerted the subscription
    Agreement.
    Mr Vele advised Mr Eludeme that the local and international
    financial and legal Advisors should be
    paid for services rendered in accordance with and for the
    purposes of implementing Cabinet Decision
    No 79/2014.
    DoT deposited K1,250,000.00 into Pacific Capital Ltd Managed
    Account with ANZ bank (PNG) Ltd.
    41. 11 March, Mr Kamburi advised Mr Kumarasiri that the Certificate
    did not include the Shareholder
    Resolution which was signed and hence he sent an amended and
    verified Certificate for Mr
    Kumarasiri‘s signature.

    Minister Marape gave his approval for the NPCP to enter into
    Payment Direction Deed in accordance
    with and for the purposes of implementing Cabinet Decision No
    79/2014.

    Dr Ngangan and Mr Vele signed and approved the APC form to
    release AU$14,555,759.00 to be paid to
    the Consultants relating to the purchasing of Oil Search Ltd
    shares, in accordance with Mr
    Rolpagarea‘s advice of 5 March 2014, his advice following the
    Cabinet meeting and in accordance with
    and for the purposes of implementing Cabinet Decision No 7/2014.

    Chronology of Events Page xxxix

    42. 12 March, Mr Babaga R. Naime, Acting Board Secretary for CSTB,
    advised Mr Rolpagarea that the
    CSTB awarded the Contract to both local and International
    Consulting Firms, in accordance with the
    PFMA 1995 and the powers of the CSTB under such Act and in
    accordance with and for the purposes
    of implementing Cabinet Decision No 79/2014.

  • Page 58 of 475

  • Mr Eludeme certified that the inviting of tenders for the
    provision of financial, legal and technical
    advisory services was impractical or inexpedient, in accordance
    with the PFMA 1995 and the powers
    of the CSTB under such Section 40 of such Act and in accordance
    with and for the purposes of
    implementing Cabinet Decision No 79/2014.
    Dr Ngangan approved the application for the Department to
    complete and issue the APC for the above
    Procurement, in accordance with the provision by CSTB of the COI
    and in accordance with Mr
    Rolpagarea‘s advice of 5 March 2014, his advice following the
    Cabinet meeting and in accordance with
    and for the purposes of implementing Cabinet Decision No 79/2014.
    The State, NPCP and UBS AG agreed to the terms and conditions
    upon signing the Payment Direction
    Deed that directed PNG Liquefied Gas Global Company (GloCo) to
    pay immediately available funds
    due to NPCP to UBS AG.
    UBS AG confirmed with Mr Vele the terms and conditions of the
    financing transaction that were
    entered into between the State and UBS AG in respect of Oil
    Search Ltd shares.
    The Prime Minster, Hon Peter O‘Neill, MP as Treasurer and Mr Vele
    in accordance with Mr
    Rolpagarea‘s advice of 5 and 10 March 2014, his advice following
    the Cabinet meeting and in
    accordance with and for the purposes of implementing Cabinet
    Decision No 79/2014, UBS AG (the
    Arranger), UBS AG (the Facility Agent) and UBS Nominees Pty Ltd
    signed the Bridge Facility
    Agreement.
    The GGPNG witnessed by Mr Okuk signed the Specific Security Deed
    (CHESS Securities – Collar) with
    UBS AG that provided security to the loan acquisition.
    The GGPNG, witnessed by Mr Okuk signed the Security Trust Deed
    with UBS Nominees Pty Ltd that
    provided security to the loan acquisition.
    The GGPNG, witnessed by Mr Okuk signed the Participant
    Sponsorship Agreement with UBS Nominees
    Pty Ltd.
    The Prime Minster, Mr Vele, UBS AG (the Arranger), UBS AG (the
    Facility Agent) and UBS Nominees Pty
    Ltd signed the Confirmation Side Letter.
    The GGPNG witnessed by Mr Okuk signed the Nominee Deed with UBS
    AG, UBS Nominees Pty Ltd and
    UBS Securities Australia for the Nominee (UBS Nominees Pty Ltd).
    The Substantial shareholders notice prepared and lodged with Port
    Moresby Stock Exchange (POMSox)
    and ASX lodged on 17 March 2014.
    The State (Subscriber) represented by the GGPNG witnessed by Mr
    Okuk signed the Subscription
    Agreement with Oil Search Limited (Issuer).
    Mr Stephen Gardiner, the Chief Financial Officer for Oil Search

  • Page 59 of 475

  • Ltd, advised that Goldman Sachs
    Financial Markets Pty Ltd with a Bank Account number
    011-112034-041 was the recipient of the
    Subscription.
    Oil Search Ltd announced completion of share placement and file
    appendix 3B, Cleansing Notice and
    Completion Letter.
    43. 14 March, the Substantial shareholder notice prepared and lodged
    with POMSoX and ASX (lodged on 17
    March 2014).

    44. The Commission issued directives under Section 27(4) of the
    Constitution determined that it was
    necessary to issue a direction under Section 27(4) of the
    Constitution to freeze all further progress on the
    PGK3 Billion loan and requested for collective cooperation from
    the Prime Minister; and the members
    of the NEC; the Chief Secretary; the Minister for Treasury and
    the Minister for Finance; the Secretary,

    Chronology of Events Page xl

    DoF; and the Secretary, DoT; the Attorney-General; and the
    Secretary, DJAG; the Governor of BPNG;
    Petromin; and IPBC; and Port Moresby Stock Exchange Limited; and
    Oil Search (PNG) Limited; and UBS
    Nominees Pty Ltd, despite the fact that the Transaction was
    complete and the purchase settled.

    45. 20 March, Mr Rolpagarea advised Mr Naime on his legal opinion on
    the request for the issuance of
    Legal Clearance – CSTB COI 02/04, which is that he states that
    the COI was issued in accordance with
    PFMA Section 40, not issued in accordance with Financial
    Instructions and was improper. He stated
    that all the Consultants of they had provided work should be paid
    on a Quantum Merit basis on the
    basis of their work actually performed and the person who would
    be in the best position to decide
    what the quantum for payment would be was Mr Vele. His legal
    opinion on the COI is incorrect – the
    COI was correctly issued as the COI was issued in accordance with
    the discretion and powers given to
    CSTB by S40 PFMA. The Finance Manual restriction on that
    discretion and those powers is
    inconsistent and therefore void pursuant to S117 PFMA.

    25 March 2014, Mr Polye commences OS142 against the State seeking
    to have the loan transaction
    declared void on the basis of a breach of S209 of the
    Constitution and for himself to be re-instated as
    Treasurer.
    Mr. Vele responded to the Ombudsman Commission‘s Summons in which

  • Page 60 of 475

  • he forwarded a copy of the
    KPMG‘s analysis of the proposed monetised collars in relation to
    financing the purchase Oil Search
    Limited shares. He also stated that the Parliamentary Approval of
    the Bridge and Collar loans totalling
    A$1.225 Billion through the Budgetary process had not been
    obtained on the basis of the advice from
    the State Solicitor. The Department was advised by the State
    Solicitor that this Transaction must now
    be tabled at the next sitting of Parliament in May 2014, and for
    which the Treasurer will do. In specific
    reference to Point 6, the structure of the Sovereign Wealth Fund
    (SWF) has not yet been finalised and
    Treasury as the Lead Agency in consultation with the State
    Technical Working Group (comprising the
    Department of Justice and Attorney-General, the Central Bank, the
    Department of National Planning
    & Monitoring and Treasury) and the Secretaries Committee
    (comprising myself as the Chairman and
    the Governor Loi Bakani, Secretary Dr. Lawrence Kalinoe and
    Acting Secretary Juliana Kubak) have
    made several adjustments which will be tabled for Parliament in
    the May session.
    46. 26 March, Mr Rolpagarea stated that he was not given enough time
    to thoroughly go through the
    documents and that he was not present at the CSTB meeting that
    approved the issuance of the COI.
    For the State Solicitor to give out legal advice and them claim 2
    weeks later that he not had enough
    time and that there is an issue with the advice is negligence on
    his part. It is proper and reasonable for
    all persons who relied upon Mr Rolpagarea‘s advice, to have
    relied upon his advice given. It is
    professional negligence for a senior lawyer to advise his clients
    and then claim his advice was faulty as
    he did not have enough time, after his clients have relied upon
    his advice. This may be misconduct on
    behalf of the State Solicitor but no on behalf of those that
    relied upon his advice such as Mr Vele.

    47. 28 March, Mr Eludeme advised Mr Vele that the State Solicitor
    declined the issuance of legal clearance
    of the COI but the Consultants could be paid on a Quantum Meruit
    basis and such quantum was to be
    determined by Mr Vele.

    Mr Kumarasiri advised the Commission that the IPBC gave its
    approval for NPCP to go ahead with the
    transaction and referred the matter to the Minister for Finance
    to execute.
    48. 10 April, Mr Eludeme advised Mr Vele that the Board effectively
    nullified the issuance of the COI for
    the engagement of private Consultants.

  • Page 61 of 475

  • 49. 11 April, Mr Sonk directed Mr Peter Graham, MD for GloCo to
    divert all distributions of payments
    payable to NPCP to be paid to UBS AG (Singapore Branch).

    Mr Sonk and Mr Wato of NPCP directed Mr Graham of Esso Highlands
    to immediately pay all
    available funds to UBS AG.
    50. 22 April, Ashurst Lawyers advised Norton Rose Fulbright of
    Australia that non-compliance with
    payment obligations would constitute in an Event of Default and
    UBS AG can commence enforcement
    processes without further reference to the State.

    Chronology of Events Page xli

    51. 28 April, Mr Polye reiterated to Hon Theodore Zurenuoc, the
    Speaker of Parliament, his position that
    the government‘s borrowing UBS AG loan was bad. This is
    irrelevant to a chronology – Mr Polye‘s
    opinion.

    52. 30 April, Mr Polye stated that the loan was an unplanned
    activity and it was not a prudent thing to do
    and it breached the 2014 Budget Appropriation Bill and the
    Fiscal Responsibilities Act.

    Ms Tessa Hoser of Norton Rose Fulbright of Australia advised Mr
    Vele that in the event of a default
    UBS AG would charge default interest on any unpaid interest.

    53. 2 May, Mr Vele stated that the State engaged UBS AG together
    with the other financial and legal firms
    as they were already providing the services.

    8 May, National Court dismissed Application by Don Polye, MP to
    declare loan void of breaching
    Section 209 of the Constitution and to be re-instated as
    Minister for Treasury, as an abuse of process.

    The National Court made the following findings of Fact on 8 May
    2014;

    i. In 2009 the State through IPBC and from IPIC had
    obtained a loan to purchase the State‘s interest in the
    PNGLNG project by virtue of the issue of an Exchangeable
    Bond. The loan had been secured by the
    State‘s shares in the Oil Search Limited and mortgaged
    over all the State owned Enterprises. The
    maturity date of the Bond was 5 March 2014. Under the
    terms IPIC could take on the maturity date in

  • Page 62 of 475

  • repayment of the loan either the shares, cash and shares
    or just cash. IPIC had to make an irrevocable
    election 2 weeks prior to maturity dates as to what it
    wanted in repayment.

    ii. At the same time, the government, advised by the
    (Central Bank) BPNG and Department of Treasury,
    organized with UBS – after seven months of searching for
    the right financing institute, to re-finance the
    IPIC loan – that is, to repay the loan with cash. The
    Arabs however on the date for notice advised they
    would take the shares in Oil Search in repayment of the
    loan. The government policy has been always to
    retain shares in Ol Search. So instead of paying the
    Arabs back with cash – a lesser amount was borrowed
    to purchase 10.1% shareholding in Oil Search. A 10.1%
    share in Oil Search prevents any foreign takeover of
    Oil Search. Oil Search is the biggest company in PNG and
    in the top 25 on the Australian Stock Exhange.
    To lose Oil Search to overseas interest and have then
    Oil Search leave would be devastating to the PNG
    economy due to the tax it pays and the jobs it creates.

    iii. Further all international analysts predict an increase
    in value of Oil Search given the investments and
    directions the company is entering into. Government
    policy was for Papua New Guinea not just received
    royalties and taxes but also participate in the
    extraction of resources for the betterment of the people of
    PNG.

    iv. On 5 March 2014, IPIC took possession and ownership of
    the Oil Search shares previously owned by
    government – being 13.17%.

    v. On 6 March 2014, NEC approved the borrowing of USD$1.249
    Billion to purchase 14.39 million shares,
    with such borrowing to be secured solely by the shares
    themselves. Initially the State itself would be the
    subscriber but within three months of the transaction
    Petromin is to take over as subscriber and the
    debt would be off balance sheet and refinanced. The
    shares were to be purchased for a price of $8.20
    instead of the market value on the day of $8.55 since
    this time the share price has risen. No state owned
    enterprises have been mortgaged and the State‘s debt
    exposure has not been reduced.

    vi. Despite Cabinet‘s approval and the fact the plaintiff
    was a Cabinet when the decision was made,
    Minister Polye refused to sign the requite documents.
    Unfortunately for the plaintiff, he failed to
    understand the trading deadlines on the Australian Stock
    Exchange (ASX) and the approvals for the

  • Page 63 of 475

  • State had already been given by UBS – and to start the
    whole process off with Petromin, the window for
    purchase would have been closed. Oil Search had
    announced a halt in trading on 4 March 2014 and the
    Rules allow only 48 hours of cessation of trading (to
    prevent insider trading) as it had to notify the Stock
    Exchange of a major purchase – so the deadline was 5pm
    on 6 March 2014 for Oil Search to have
    determined to purchase into Elk Antelope on the basis of
    the funds coming in from the sale of shares to
    the State.

    vii. Minister Polye was de-commissioned as a Minister on 10
    March 2014 by the Head of State (and duly
    gazetted) and the treasury portfolio reverted to the
    Prime Minister.

    viii. The transaction of the purchase of the Oil Search shares
    and the UBS loan was completed on 12 March
    2014 and announcements were made by Oil Search to the
    Australian Stock Exchange (ASX0 in this
    regard. The deal was done and all documents completed
    and registered.

    Chronology of Events
    Page xlii

    ix. On 14 March 2014 the Ombudsman Commission determined to
    investigate into the loan and the
    transaction. It issued a directive to stop work on the USB
    loan. The Ombudsman Commission had not
    realized that the deal had already been finalized. All
    documentation has been provided to the
    Ombudsman Commission on the loan and transaction and now
    there is a current investigation into the
    deal that has been done. There was therefore nothing left
    for the Ombudsman Commission direct to
    stop.

    54. 9 May, Mr Anthony Yauieb, Deputy Secretary for DoT, stated that
    the NEC Policy Submission on the
    UBS AG Loan to purchase Oil Search Ltd shares was prepared
    outside by Mr Vele. This statement is
    incorrect. Mr Vele as Acting Secretary for Treasury and as
    essentially the Project manager for the
    matter prepared the submission with the assistance and advice of
    the Consultants, as would be
    expected given legal and financial positions were required in the
    submissions. Mr Yauieb was the only
    other person who had applied for the substantive Secretary of
    Treasury‘s position. His statement
    tainted is with personal interest.

  • Page 64 of 475

  • 55. 14 May, Mr Vele advised the Commission that the State is
    required to make periodic interest payments
    to UBS AG.

    Finance Forms number 3 & 4 (FF3& FF4) indicated AU$2,261,938.36
    which is about K5,543,966.57
    was paid to UBS AG.

    56. 15 May, Mr Luke Goldsworthy and Ms Celle Raguine,
    Representatives of UBS AG pointed out to Mr
    Vele that failure to pay interest breached clause 5.1(b) of the
    Agreement, that is all payments to be
    made under the Commitment Documents that stipulated that all
    payments shall be made in full and
    without deductions.

    15 May OC advises Mr Vele, that it has received Mr