Kumul Petroleum clarifies Papua LNG equity financing and economic benefits

Kumul Petroleum Holdings Limited (KPHL) advises that its US$1.1 billion funding plan for the State's 22.5% equity participation in the Papua LNG Project, approved by NEC, combines domestic borrowing with cash flow from KPHL's existing PNG LNG Project investment. The plan does not require any direct allocation from the National Budget for this equity contribution.

KPHL Chairman Ambassador Isaac Lupari said that any public discussion should distinguish KPHL's equity funding obligations from the financing required for the Papua LNG Project as a whole.

"KPHL is financing the State's participation through its own commercial resources and domestic lenders. The US$1.1 billion package supports our equity commitment; it is not the total financing requirement for Papua LNG Project," Chairman Lupari said.

Explaining the financing plan, Chairman Lupari said: "The US$1.1 billion funding package for the State's 22.5% participation in the Papua LNG Project will come from two sources. Domestic lenders will provide US$300 million through a syndicated loan arranged by Bank South Pacific and the remaining US$800 million will come from cash flow generated by KPHL's 15.1% interest in the PNG LNG Project over the 2026-2032 construction period."

"We will use these funds progressively to meet our share of project costs as payments, known as cash calls, fall due. The US$800 million will be generated over that period; we are not saying that the full amount is held in cash today - this is a more efficient, lower cost approach."

"We have already secured US$180 million ready for our first cash call following FID, this is part of the US$1.1 billion package covering the State's equity participation. Financing for the Papua LNG Project as a whole is a totally separate requirement," Chairman Lupari said.

Chairman Lupari pointed out that using KPHL's cash flow and domestic borrowing avoids the need for any direct National Budget allocation for equity contribution. It preserves budget capacity for government priorities, including health, education and public infrastructure.

"The financing plan is designed to avoid triggering the World Bank's negative pledge requirements and to limit recourse to the State. The extent of lender recourse and any security over KPHL's assets or cash flows will be governed by the agreed financing documents and applicable obligations."

KPHL will continue to support the Government through dividends and other corporate contributions. However, this financial support will be minimal during the Papua LNG Project financing period as KPHL prioritises its project funding commitments and debt repayments. The level of support will be determined by operating performance, available cash flow and the need to maintain KPHL's financial stability.

Chairman Lupari said the project's expected benefits would flow into the economy at different stages, "During Papua LNG construction, project spending will support wages for Papua New Guinean workers and payments to local suppliers and contractors. These flows will create business opportunities and support household incomes."

"Once production begins, LNG export sales will generate foreign exchange earnings. Papua New Guinea will also receive taxes, royalties and other agreed project benefits, while KPHL's equity participation will provide a source of long-term investment returns for the State."

"These benefits will build over time. Their value and timing will depend on the project reaching FID, successful construction, production performance, LNG prices, costs and debt repayments," Chairman Lupari said.

"For the first time in the history of our country, the Government, through KPHL, is financing the State's participation in a major resource project of this scale through domestic sources, combining financing from domestic lenders with KPHL's own PNG LNG Project cash flow,"

Chairman Lupari commended Prime Minister Hon. James Marape and his Government for their leadership and support in achieving this historic milestone for Papua New Guinea.

"Our responsibility is to turn petroleum ownership into sustainable value for Papua New Guineans. This requires clear financing, careful cash flow management and strong governance throughout the investment cycle," he said.

KPHL welcomes public commentary and debate, but this must be based on factual information, particularly where the State is participating in major projects that require global partners and international financing.

Chairman Lupari urged leaders to exercise greater sensitivity and responsibility in their public statements, recognising that inaccurate or misleading commentary can undermine partner confidence and efforts to secure financing for future projects of national importance.

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