The Extractive Sector As It Was In 2019
The resource industry in Papua New Guinea has played a vital role in the economic and social aspects of the country.
However, with each year there are new challenges identified amid the many successful project deliveries and dividend contribution to landowners and the State through corporate tax, especially from major players in the industry including Barrick, Newcrest, ExxonMobil PNG, Oil Search and Ok Tedi.
For the year 2019, the country witnessed a lot of events and announcements made in this important industry.
Some of which pushed a number of nerves in the industry where investors and industry players are put to the test of whether they will continue to operate in Papua New Guinea or close its doors and walk away.
This at the same time has forced government, stakeholders and landowners to come to a roundtable to negotiate and review resource laws so that everyone remain a winner at the end of the day.
The country welcomed its biggest announcement for the K44 billion (USD13bn) Papua LNG project in March during the third CWC PNG Petroleum and Energy summit in Port Moresby for the gas agreement, which was signed on April under the former Prime Minister Peter O’Neill and Petroleum and Energy Minister Sam Basil.
However, a new twist took place when James Marape succeeded Peter O’Neill as prime minister in May, where under Marape’s leadership, Petroleum Minister Kerenga Kua arranged for a state negotiating team to review the gas agreements to benefit all players involved in the project following so much debate between landowners, state and developers.
This, however, was further clouded with a major landowning umbrella association taking out a temporary court order further complicating progress.
Another project in the petroleum sector, P’ynyang negotiations, were still in the works as commentators were looking to the new regime to continue the momentum achieved by the Papua LNG signing, most of which was put on hold amid the transition in government.
Mr Kua took carriage of the negotiations with ExxonMobil PNG, the set developer, an update of which saw Exxon turn down the State negotiating team’s proposed terms as outlined by Mr Kua.
P’ynyang, when successful, will help feed an expansion of ExxonMobil’s PNG LNG plant. Mr Kua, since taking over the portfolio, did not waste time in deciding on the petroleum projects one of which is the country’s first offshore project in the Gulf of Papua basin, Pasca A.
Mr Kua granted the developer, Twinza, the permission to further develop the Pasca LNG following a ministerial determination on August 30, 2019.
This project has all its reserves proven, development plan completed and production licence pending approval. Currently, its concept selection work on the second phase of development associated with LNG export has started.
According to its website, Pre-FEED engineering has been completed and Twinza is currently ready to commence delivery of the first phase of the Pasca A field development project, starting with FEED work.
It is anticipated that immediately after FEED for the first phase has been completed, the second phase of development will start. While these two phases of development are separate, they are sequentially linked.
Moving on into the mining sector, one of the largest mining operations in PNG is at Porgera, developed by Barrick Niugini Limited had its Special Mining Lease expire on August but it is, however, subject to continuation until the determination of the extension application.
This is because the National Court has declared that the mining operation is protected under the Mining Act 1992 and may continue to operate until the State makes its determination to extend.
With this in play, different factions of the landowner groups in Porgera are debating on whether the mine should have its license renewed for operation.
While this is going on law and order issues in the area have gone out of hand involving illicit trading, illegal mining and killings. All mining and petroleum companies operating in PNG are to adhere to the Mining and Safety Act of the country.
However, in October this year, the state had to shut down Ramu nickle’s processing plant following a slurry spillage that occurred in August.
The mine was reopened a week after inspectorates from the Mineral Resources Authority saw fit that the site was safe for both employees and locals.
Meanwhile, the flagship project of the government which they aim to deliver the Wafi-Golpu project in Morobe Province had to defer its planned work program during the third quarter of 2019.
This came as a result of the continued delay in the unresolved legal proceedings between the state and the Morobe provincial government regarding internal distributions of PNG’s economic interests in the project.
The project is also subjected to see various agreements required for the completion of the permitting process and the granting of a special mining lease being given most likely after the completion of the Mining and Safety Act 1992 review.
Mining Minister Johnson Tuke in his address to the industry during the recent Mining and Petroleum and Conference held in Port Moresby earlier this month warned all miners in the country.
Mr Tuke said under the Mining and Safety Act 1992 review that is being carried by the state, industry and stakeholders, the state would very much want to see that all beneficial terms and conditions with investors is beneficial to all parties including the investor.
As a result, the terms and conditions at which they would like the industry to consider is one that all new contracts for the exploitation of PNG’s mineral wealth will be negotiated under the new Mining Act 1992, with terms and condition that are based on acceptable practices that are common in international jurisdictions and are similar to PNG circumstances.
Six major regulations are being put forward for mining companies to ponder on before April next year when the review will be finally tabled in Parliament and this may change the whole dynamics of the industry.
The six key regulations includes mineral ownership, repository of production data at the Mineral Resources Authority, Social levy on operating costs of mining companies, downstream processing, gold bullion bank and local content.
The move by the state to finally review its long overdue Mining and Petroleum Act has caused much talk amongst industry players as this may also impact them in a big way.
Representing the industry, the PNG Chamber of Mines and Petroleum, reiterated to the state that both mining and petroleum companies contribute significantly to the socio-economic development of the country.
The chamber raised that, in order for the industry to continue doing that, investors will need to be confident in the legal, fiscal and regulatory environment in PNG.
It (industry) has also confirmed its commitment in supporting internationally competitive legislation that ensures modern regulation in the industry, whilst encouraging and maintaining investment.
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