Future of PNG deep sea mining uncertain

The future of Deep sea mineral mining off the coast of Papua New Guinea faces uncertainty.

UPI

The future of deep-sea mineral mining off the coast of Papua New Guinea faces uncertainty.

Canadian company Nautilus Minerals’ Solwara 1 Project in the Bismarck Sea off PNG, embroiled in disputes over funding as well as questions over environmental and social effects, has come to a halt after two years of development, Inter Press Service reports.

Nautilus Minerals has referred to Solwara 1 as the world’s first commercial seafloor copper-gold project and launch of the deep-water seafloor resource production industry, while “maintaining an environmentally and socially responsible approach.”

Last month, Nautilus announced it was terminating construction of its $407 million seafloor production system.

Nautilus said the PNG government has a contractual obligation to pay approximately $75 million associated with a 30 percent investment in the project.

“The state disputes this interpretation and Nautilus cannot continue to (exclusively) fund the build of the Solwara 1 equipment,” Nautilus told IPS.

The PNG government, in issuing a license to Nautilus in 2011 to mine Solwara 1, had agreed to take a 30 percent stake in the project and co-finance it. But in June 2012 the PNG government carried out a legal process to determine if it was obligated to contribute to funding Solwara 1.

“We were paying for it all ourselves and it was becoming too costly,” Michael Johnston, Nautilus’ chief executive officer told SciDev.Net. “We were at an expensive stage of the build. We were spending US$3 million or US$4 million a week. For a company of our size, we couldn’t continue to pay for that ourselves.”

PNG’s previous government had preferred to take equity in most resource projects, says Colin Filer, an associate professor at the Australian National University. But the new government which came to power in August 2011 — after Nautilus was issued a license for the project — has taken a more strategic approach, Filer said.

Meanwhile, environmentalists have called for more careful consideration of deep-sea mining.

“Another 10 to 15 years of marine research really needs to be done so that we better understand the deep marine ecosystem before we embark on deep-sea mining,” Chalapan Kaluwin, professor of environmental science at the University of Papua New Guinea, told IPS.

“We don’t understand enough about the potential impacts of this deep-sea mining project on marine biodiversity, fisheries and coral reefs, as well as people and communities,” Kaluwin said.

Nautilus says it holds more than 193,051 square miles of “highly prospective exploration acreage” in the western Pacific including the Solomon Islands, Fiji, Vanuatu and Tonga, as well as in international waters in the eastern Pacific.

Byron Chan makes mining industry nervous

Bad cop Chan

PNG Industry News

PNG Prime Minister Peter O’Neill delivered a strong message on the importance of “investor confidence and certainty” but his Mining Minister, Byron Chan, read from a script that seemed destined to deliver the opposite.

In a wide-ranging speech to the 12th PNG Mining and Petroleum Investment Conference in Sydney last week, O’Neill told a record 1350 registered delegates: “The undertaking I give you today is this, there will be no drastic or radical change to the laws that exist today – and there will certainly be no immediate change.”

In sharp contrast, Chan promised significant legislative changes in the coming year, including changes to the Mining Act, the Mining (Safety) Act and Offshore Mining Policy.

Chan’s presentation, which set the program for the 2nd day of the conference back by almost an hour, gave mining company representatives a bit of an adrenalin rush when he said there were proposals for a mine closure plan to be submitted when a company applied for an exploration tenement.

The actual text suggested, more plausibly, that a mine closure plan would be required when an application was made for a mining lease.

It was not the only occasion the Mining Minister went off script. On the first occasion he quickly corrected himself after his reference to the O’Neill-Namah Government resulted in uncomfortable laughter breaking out among the audience.

In his introduction the Minister said mining had been the largest contributor to the PNG economy “for well over ten years”. Maybe it was too hard to reflect back to the early days of independence when the Bougainville copper mine was a portent force in the PNG economy as the only major resource venture at the time.

One of the oddest plans put forward by the Minister was a suggestion that the revised mining policy would limit to ten the number of exploration licences “that any one person can hold at any one time”, while at the same time increasing the licence term from two years to five years.

The maximum area for an exploration lease will also be reduced by half from the current allowance of 250 sq km or 750 sub-blocks.

These are indeed groundbreaking ideas that could only stifle the all-important exploration sector. Unless this exercise becomes retrospective, which is unlikely because that would probably be illegal, it is largely academic since most worthwhile lease areas throughout the country are already accounted for.

Virtually all countries with any history of mineral exploration generally are more concerned with expenditure levels, and adequate activity, rather than the size of the lease areas granted.

For example, a recent release of mineral exploration acreage in South Australia provided for a number of leases that exceeded 1,000 sq km.

Minister Chan appears inclined to take a prescriptive approach to future exploration activity. Socioeconomic and environmental impact assessments would be made a requirement at the exploration phase, when explorers will have little awareness of the nature and scale of mineralisation they may discover.

In his address PNG’s Minister for Petroleum and Energy, William Duma, was highly optimistic about the future for the oil and gas industry. He said total gas reserves could amount to 60 trillion cubic feet or more and provide the basis for LNG exports as well as creation of a domestic industry.

He hoped companies like InterOil, Talisman, Horizon and Eaglewood Energy develop discovered resources “quickly without further delays within the next three years”.

Mr Duma also acknowledged that the government had an “abysmal” track record when it came to delivering on Memorandum of Agreements signed between the government and landowner groups.

To counter this, he said, there were plans to set up Expenditure Implementation Committees for each petroleum project to manage MoA funds as well as project implementation in these areas, an initiative that would be welcome news to the petroleum industry.

Mr Duma also announced that a Cabinet submission would be made in the New Year on the establishment of a Petroleum and Energy Authority that, he said, had been tailored to meet the requirements of both government and industry.

The government, he said, was concerned about companies that warehouse the license interests and would adopt a “use it or lose it” policy.

Industry leaders have indicated there have been minimal exchanges between government and industry on the proposed Petroleum and Energy Authority or the legislation that will be amended for the mining sector.

Prime Minister O’Neill, in reiterating plans for a wide-ranging review of the resource sector, inclusive of a corporate tax review, said this exercise was not just for “window dressing purposes…(as it) must be more than just very welcome contributors to the budget bottom line.

“They have to be imposed in a way that does not act as a significant disincentive to investment, and international competitiveness. We must have a modern and competitive resource tax regime,” O’Neill said.

Other key messages delivered by the PNG Prime Minister included a strong case that political stability will be further strengthened in the country; that he has begun in earnest the fight against corruption and that the government was committed to ensuring the continuation of strong economic growth.

Environmental uncertainties halt deep sea mining

Independent European Daily Express | IPS

The world’s first deep sea mineral (DSM) mining venture in the Bismarck Sea off the northern coast of Papua New Guinea in the southwest Pacific has come to a halt after two years of development.

While the mining company is embroiled in a disagreement over project funding, unprecedented opposition by politicians, academics and local communities has focussed on the unknown environmental and social impacts of this untried mineral extraction process.

Deep sea mining, considered the new resource frontier, has been the subject of debate since the 1960s. But financial and technological constraints have hindered the viability of ventures.

Now, the gradual depletion of land-based mineral resources, a rise in demand for metals by growing economies in Asia and rapid technological advances have generated new interest in deep sea mining.

Attention has been focussed on hydrothermal vents in the ocean’s floor at depths of more than 1,000 metres, in volcanic regions where geothermal activity in the earth’s crust has created sulphide deposits containing silver, gold, copper, manganese, cobalt and zinc.

Many Pacific island states, which have small land areas, have expressed interest in exploiting their ocean resources for economic development.  Fiji, for instance, has a total land area of just 18,376 square kilometres and 114,460 square kilometres of territorial waters.

DSM exploration is currently underway or proposed in Papua New Guinea (PNG), Tonga, Vanuatu, Fiji and the Solomon Islands, which all possess Seafloor Massive Sulphides (SMS).

Last year the PNG Government issued a mining lease to the Canadian company Nautilus Minerals, for a period of 20 years.  The inaugural Solwara 1 Project is located 30 kilometres from the New Ireland coast in the Bismarck Sea with an extraction area of 0.11 square kilometres at a depth of 1,600 metres.  Mining, predicted to produce 275 million dollars in gold and 783 million dollars in copper, was due to begin in 2013.

However, given that Melanesia has a very high rate of biodiversity, the scientific community here is deeply concerned about inadequate understanding about the impact of deep sea mining on marine life.

“It will take a long time to address all of the uncertainties in terms of our knowledge of the deep sea environment,” Chalapan Kaluwin, professor of environmental science at the University of Papua New Guinea, told IPS.

“Another 10 to 15 years of marine research really needs to be done so that we better understand the deep marine ecosystem before we embark on deep sea mining.

”The unique marine life supported by hydrothermal vents, such as tube worms, clams and crabs, was only discovered in the 1970s.  Scientists believe that the Manus Basin in the Bismarck Sea could contain more than 40,000 hydrothermal vents.

A spokesperson for Nautilus Minerals in Australia claimed, “Seafloor production offers many advantages over typical land-based operations with higher grades (of minerals) compared to (those on) land, a small extraction footprint with reusable production infrastructure…no blasting and relatively little removal of unwanted material covering the sought after deposits.”

Company literature states that DSM mining operations will have “no direct impacts to communities, fisheries or reefs”, but acknowledges some seafloor habitats would be disrupted; plume generation – which occurs as a result of water disturbance, such as when tailings are pumped back into the deep sea – could occur; and noise and vibrations are likely.

Australian oceanographer, Dr. John Luick, who reviewed the company’s Environmental Impact Statement, claims that key information about sea currents, tides and the toxicity of seabed plumes is absent, thus leaving many questions unanswered about the likelihood of pollutants being conveyed out of the deep sea and into marine food chains or within the range of coastal communities in New Ireland.

“We don’t understand enough about the potential impacts of this deep sea mining project on marine biodiversity, fisheries and coral reefs, as well as people and communities,” Kaluwin agreed.

The International Seabed Authority (ISA) and the Applied Geoscience and Technology Division of the Secretariat of the Pacific Community (SOPAC) concluded last year, “The current level of knowledge and understanding of deep sea ecology does not make it possible to issue any conclusive risk assessment of the effects of large-scale commercial seabed mining.”

Furthermore, many Pacific Island states are yet to establish appropriate DSM legislation and regulatory bodies.

“PNG does not yet have all of its maritime boundaries established,” Kaluwin said. “The government does not yet have appropriate off-shore or deep sea mining policies and legislation in place.  We also need to address the traditional rights of landowners and communities over the marine environment.”

SOPAC is currently working with the EU on the Deep Sea Minerals Project to develop regional and national capabilities to manage and monitor seabed development. This year the project launched the Regional Legislative and Regulatory Framework for Deep Sea Minerals Exploration and Exploitation to guide Pacific Island nations in developing new laws.

Hannah Lily, legal advisor to the DSM Project, told IPS, “Appropriate regulatory mechanisms, which require of proposed DSM (projects) further in-depth scientific research and analysis, should be in place before any DSM mining project takes place.”

On Oct. 23 the government received a petition, signed by 24,000 people in PNG, declaring opposition to the Solwara 1 project.

In early November, Nautilus Minerals, which believes the government has a contractual obligation to pay approximately 75 million dollars associated with a 30 percent investment in the project, announced it was terminating construction of the 407 million-dollar seafloor production system.

“The state disputes this interpretation and Nautilus cannot continue to (exclusively) fund the build of the Solwara 1 equipment,” Nautilus told IPS.

Dr. Helen Rosenbaum, coordinator of the Australia-based Deep Sea Mining Campaign, commented that there was now an opportunity for the government, company and civil society to seriously address the outstanding legal, environmental and social issues.

She believes that “no deep sea mineral mining project should occur in the region until it has been proved that it will not have any detrimental impact on the environment or local communities”.

PNG LNG promise of prosperity a ‘pipedream’

The Australian government appears more concerned with the profits of private companies rather than the welfare of people in Papua New Guinea.

ABC Radio Astralia

That’s a conclusion reached by Jubilee Australia following a study of the giant PNG LNG project.

While there is a lot of hype about the Exxon Mobil project in the Southern
Highlands Jubilee Australia says it may turn out to be a pipe dream with people in PNG losing out to multinational corporations and the PNG political elite.

Presenter: Geraldine Coutts
Speaker: Carmel Ann Polce, Executive Director, Jubilee Australia

POLCE: It’s an enormous report that’s been researched over the last two years and as you’ve suggested, our findings suggest that Australia, through organisations like ASIC give support to these projects, because it’s going to make big profits for Australian businesses through equity and arrangements and contracts, but they add that these projects are going to be the silver bullet for countries like PNG, that it’s going to deliver their economies from poverty to prosperity and what we’ve discovered through our research and our scrutiny of the assumptions and the predictions is that that’s not the case.

COUTTS: Why not?

POLCE: Well, there’s abundant evidence, there’s worldwide evidence that resource-abundant countries, like PNG, don’t benefit from projects like that. PNG itself has decades of mining projects and so the evidence is all there. Countries who relied on large natural resource projects for development actually have slower growing economies that don’t. They have more corruption and they have a greater likelihood of civil unrest and intersocietal conflict. So our findings suggest that it’s possible that rather than bring prosperity to PNG, the project will cause greater economic hardships, particularly for PNG’s most vulnerable. It will further entrench corruption and inflame the concerns of the debts.

There’s enormous predictions that have been made about this project and promises and if those promises are unmet, there will be great upset and civil disturbance.

COUTTS: Well, who do we hold accountable for this?

POLCE: The Australian government undertook a process to approve of the loan. It’s the way ASIC does business when they’re making loans on the national interest account and that process is locked. It’s not acceptable to the Australian people. We don’t know on what basis these decisions are made, because it’s all made behind closed doors, cabinet in confidence, basically at the discretion of the Trade Minister. And so our ambition is to profile the projects like PNG-LNG, the need for reform to those processes.

COUTTS: And how would you see that reform going?

POLCE: Well, we don’t even have to sort of guess at what that reform is. The Productivity Commission have issued a report in June that outlined a litany of recommendations of how ASIC could better perform its role and we are very much aligned with the recommendations of the Productivity Commission. The government is expected to respond to that report that was issued in June imminently, any day now. They’re expected to issue their response to those recommended reforms. We’ll wait and see.

COUTTS: Alright. So the leaders now in the provinces perhaps have to make strong representation to the government, to make sure that this doesn’t happen. Is that where the leadership needs to come from?

POLCE: Possibly. There is work to be done on the ground in PNG and that’s for the people of PNG to decide. But Australia has had a role here. ASIC would suggest their involvement was very, very small, but in actual fact, our investigation suggests that all the other export credit agencies that have put massive amounts of debt funding into this project wouldn’t have done so without ASIC being involved. So that makes the Australian government complicit in any adverse outcomes from this project. So our ambition is to make sure that doesn’t happen again.

COUTTS: Now, we’ve seen this kind of thing happen in the past and the issues of corruption are not new in Papua New Guinea. So why is this happening yet again? Why has it been allowed to happen yet again?

POLCE: That’s an excellent question. Australia is having discussions all the time about what capacity-building type support they could bring to Papua New Guinee and how they could help influence the development of institutions or systems to root out corruption. But as we’ve said much is endemic. This is a generation- long project to address corruption in Papua New Guinea. It isn’t going to happen overnight, and the Australian government is aware of that. We’ve established through our investigation. So clearly the ambitions of the government were not to necessarily do  in the best term, long term interests for the future of the PNG people and that’s not acceptable. We think that if the Australian taxpayer money is going to be put into projects like this and the environmental on social impact assessments need to stand up to scrutiny and we need to ensure that this is taking a stronger line against making loans to countries that don’t have any capacity to repay the debt, to make a success of the project for the people.

New Guinea Energy banks A$14.2M from sale of Papua New Guinea permit

Bevis Yeo | Proactive Investors

New Guinea Energy has banked in US$15 million (A$14.2 million) from the sale of PPL 277 in Papua New Guinea to ExxonMobil and Oil Search to finance its exploration activity.

Importantly, it ties part of the company’s growth to the expansion of the ExxonMobil-led PNG LNG liquefied natural gas project by providing a source of ongoing revenue in the event of commercial development.

Chief executive officer Grant Worner said the sale strengthened New Guinea’s balance sheet while retaining exposure to the upside potential.

The company is entitled to a US$20 million payment if a Petroleum Development Licence is granted from the original PPL 277 area and will also receive a royalty over all revenue if commercial production occurs.

This could be worth between US$48 million and US$312 million to New Guinea depending on discovery of petroleum and its size, commercial viability of any development, as well as other factors.

Both ExxonMobil and Oil Search will each hold 50% in PPL 277.

PPL 277

PPL 227 is located next to PRL 11 and PDL 8, which holds the Angore gas field, and is also close to PNG LNG infrastructure.

While Exxon and Oil Search’s Trapia-1 well on the border of PPL 277 and PRL 11 did not intersect any prospective reservoir intervals, the permit itself contains 13 leads with oil and gas condensate potential.

Hydrocarbon seeps have also being noted at one of the leads and there is excellent access to the central area along Kutubu Road.

Future plans

New Guinea plans to carry out surveys and seismic over its 100% owned PPL 265, PPL 266 and PPL 267 to identify drillable targets and de-risk exploration activities.

This is aimed at replicating its success with selling PPL 277 and farming out stakes in PPL 268 and PPL 269 to Talisman Energy (TSE: TLM).

It will also fund activities with Talisman and Mitsubishi Corporation on the latter two permits and seek diversification of its portfolio by acquiring near term operational assets.

Analysis

The completion of the PPL 277 sale proves up New Guinea’s strategy of de-risking exploration permits before farming out interests or selling them.

It also validates the value of the company’s acreage and provides New Guinea with the cash to carry out exploration elsewhere in Papua New Guinea.

NZ: Children of black sand beaches speak against mining

Voxy

A powerful and moving video featuring the children of black sand beaches at Piha and Karekare was today released online.

Motivated by finding out what seabed mining and how it would affect their local playground, and being upset about the injustice, local children wanted to have a say.

The children came up with their own lines about seabed mining and they were put together by director Emily Carter of Karekare and filmed on Piha beach last month by DOP/cameraman Marc Mateo and a volunteer crew.

“I was talking with my children about seabed mining and what it could do to their beach, where they have lived and played their whole lives. They had a lot to say so we facilitated them having a voice. I asked the kids to write down their thoughts about seabed mining and we turned it into a long poem,” said Carter.

They really understood – and were concerned – about the threat to their surf-breaks, the Maui’s dolphins, and the beach itself. Many children were particularly concerned that their children’s children could experience the beach the same way they do now. The economic factors – where the companies are 98% foreign-owned and would bring a royalty of only 5% to New Zealand, also featured.

“Children are so clear. They can see a bad deal when it’s in front of them, and the fact that we would get only 3-5c in every dollar for their precious black sand beach seemed crazy,” said Carter.

“The intensity and belief in what they are saying is emotive and unusual. We don’t often see kids speaking in this way – but then again they are not often given a chance to have a voice.”

80 children, all local or kids with strong associations with the beach, came down to South Piha to film the video, which took a day of filming. The video was a collaborative work by locals and members of the film industry who volunteered both their skills and equipment.

PNG PRIDE: Sick of foreign miners and their lies

Report highlights the myths about who benefits from resource industries

Richard Baker | Sydney Morning Herald

THE economic benefit of Papua New Guinea’s biggest natural resources project has been questioned, with a report warning that ordinary citizens risk missing out because of corruption and contracts that favour the lead proponent, ExxonMobil.

A report by anti-poverty group Jubilee Australia, to be released Wednesday, examines the predicted economic benefit of PNG’s liquefied natural gas project and the Australian government’s provision of $500 million towards it.

The report highlights endemic corruption in PNG and warns that a government sovereign wealth fund and other official bodies established to handle billions of dollars in revenues could be defrauded.

”The governance and public life of PNG are to this day beset by political intrigue, self-interest of politicians and gross misuse of public funds,” the report warns.

Scheduled to begin production in 2014, the LNG project is valued at $22 billion and predicted to double PNG’s gross domestic product.

Australian companies Santos and Oil Search are prominent players in the joint venture project led by US giant ExxonMobil.

The report by Jubilee Australia – whose supporters include World Vision and the National Coalition of Churches – includes allegations that the PNG government was ”pressured into the signing” of agreements by the joint-venture companies.

Former PNG attorney-general Allan Marat is quoted in the report as saying he and his office had less than 24 hours to analyse a 200-page agreement before determining whether it was in the best interests of his country. ”This gas agreement was drawn up overseas. It was taken away from our government negotiating team and structured overseas. And, we are now forced to dance to the music of foreigners,” he said.

In response to questions from Jubilee Australia, ExxonMobil disputed the claims and argued that the fast negotiations could be explained by the fact the PNG government relied on many of the same fiscal terms as previously agreed to in a defunct 2006 proposal.

The report found mixed economic benefits for PNG people as a result of the massive investments already being made for the project.

It stated that although PNG citizens fortunate enough to have been directly employed by the project had reported that their livelihoods had improved, there was a strong view that ”an educated and well-connected elite” had captured most of the benefits.

Using the results of a 2011 study by New Zealand’s University of Otago, the report found the project was also leading to increased tensions among landowners in the PNG southern highlands and a phenomenon known as ”bride price”, where the groom’s family makes a payment to the bride’s family.

The expectations created by the perceived extra wealth being directed into local communities was increasing this price, making ”it more difficult for many young men to marry”.

The report also highlighted an increase in ”destructive social practices”, with the influx of temporary workers and money leading to more gambling, prostitution, drug and alcohol abuse problems.

Increasing environmental incidents have also been noted. The most recent was a January mudslide at a quarry that killed at least 26 people, mainly migrant workers. The quarry had been used by a company working on the project until mid-2011.

The Australian government’s decision to contribute a $500 million loan to help the financing of the project has also been criticised in the report. The loan by Australia’s Export Finance and Insurance Corporation was made on the basis that Australian equity in the project was about 43 per cent and there was $1.5 billion of procurement contracts available to Australian firms.

EFIC used what is known as ”the national interest account” to fund 80 per cent of the loan. As such, nearly all the documents it holds on the assessment process for the PNG loan are exempt from freedom-of-information scrutiny.

Landowner reminds Government on Ramu mine

Post Courier

Basamuk Refinery landowner Lima Mulung has reminded the PNG Government that it must honour its commitments to landowners if it wants landholders to work with Government and investors.

Mr Mulung, the chairman of the Basamuk Landowners Association, said the PNG Government had committed K10 million to his people at the start of the Ramu Nico project but to date, it has failed to deliver on this commitment.

Mr Mulung was speaking on Thursday at Basamuk during the Construction Completion and Commissioning of the Basamuk Refinery plant.
 The ceremony was attended by Prime Minister Peter O’Neill, who delivered the keynote address, his Mining Minister Byron Chan, MCC President Guo Wenqing, China’s ambassador to PNG Qiu Bohua and the man who made it all happen, former Prime Minister and Grand Chief Sir Michael Somare.

Mr Mulung congratulated all for the achievements to date including the commissioning of the refinery plant, adding it has been a long journey for both investors and the landowners.

He said part of the reason why there had been disagreements, stoppages and concerns in the past was because Government was not willing to listen to the people.
 He said Government was good at grandstanding and making commitments but when it came to honouring them, government was either ignorant or very slow.

He said this attitude always frustrated landowners, not only at Ramu but elsewhere at other developments in PNG.
 He appealed to the O’Neill Dion Government to be genuine when dealing with landowners and to honour all commitments it makes so all parties are happy.

Mr Mulung also praised Sir Michael for joining his people on the day as he was instrumental in getting MCC to get the Ramu Nickel project off the ground.

Canadian underwater miner gets sinking feeling in Papua New Guinea

James Regan | Reuters

A dispute between Papua New Guinea and Canada’s Nautilus Minerals threatens to sink plans to mine gold and other metals for the first time from the ocean floor.

It could also work against efforts by the South Pacific country to restore faith in its vast resources potential and entice more foreign companies to follow the likes of Exxon Mobil, Newcrest Mining and Barrick Gold and invest billions of dollars in resource projects.

The groundbreaking undersea venture hopes to use robots operating a mile deep to mine the sea floor near hydrothermal vents that deposit copper, gold and other minerals.

Hungry for foreign investment, Papua New Guinea (PNG), a nation of 7 million spread over an equatorial archipelago the size of California, had agreed in 2011 to pay 30 percent of the costs to build the Solwara 1 project in the Bismark Sea, which Nautilus said amounts to $80 million so far.

But in June, the government’s investment arm, Petromin, said it was terminating the agreement. Without the funds, Nautilus says it cannot afford to proceed and the matter is now in arbitration in Australia under The United Nations Commission on International Trade Law (UNCITRAL).

Nautilus’ shares have tumbled 60 percent since it said in mid-November it was laying off 60 workers and halting assembly work on the project to save cash. Chief Executive Michael Johnston said another round of job losses would follow on Friday unless a resolution can be reached.

“We don’t know where we stand at the moment,” Johnston told Reuters in an interview. “We’re optimistic because we have to be, but we just don’t know what Petromin is thinking.”

Papua New Guinea has been described as an island of gold floating in a sea of oil, surrounded by gas, but consistently punches below its weight on the global resources stage.

The impoverished country has a long legacy of mining projects derailed by environmental disasters, landowner uprisings and corruption.

ENVIRONMENTAL CONCERNS
Mining from vessels is seen as a way of avoiding some of the landowner disputes that have plagued other projects. Still, the project has been criticized for failing to adequately assess environmental risks.

“No one knows what the impacts of this form of mining will be,” said Wences Magun, national coordinator for Mas Kagin Tapani, a PNG environmental group.

“Communities want to know what concrete steps the prime minister will now take to ensure we are not being used us as guinea pigs in a sea bed mining experiment.”

Nautilus’s Johnston insists international environmental safeguards were applied to the project before a permit was granted in 2009 and that it poses no major threats since all the material mined is used, alleviating harmful waste generation.

“The deposits are mainly on the surface of the sea floor,” he said. “No mountains need to be removed, no trees need to be cleared.”

PNG’s Petromin was set up five years ago to buy into foreign projects and safeguard revenues earmarked to help local communities.

The fund has invested in 17 projects, including a $19 billion liquefied natural gas project under construction by Exxon Mobil. It is also working with Shell to identify untapped oil and gas reserves.

It is allowed to take up to 30 percent of mining and 22 percent of oil and gas projects, which it must then help fund.

Petromin has said little publicly about the Nautilus dispute, other than that the Canadian firm had not met certain undisclosed obligations under its agreement, which entitled it to terminate the pact.

Petromin did not respond to requests for clarification over its reasons for terminating the agreement and Nautilus said it had no more details surrounding the decision.

Concerned it will run out of cash, Nautilus has suspended a three-year contract to supply 1.1 million metric tonnes of unrefined copper ore to Chinese smelting company Tongling Nonferrous Metals Group Co Ltd.

NEW BEGINNING?
The dispute comes at an unfortunate time for Prime Minister Peter O’Neill, who is seeking to present his country as a secure place for foreign investment.

Faced with tighter credit markets, weaker commodity prices and uncertainty over the global economic outlook, the investment pipeline is looking less certain.

Elected in June, O’Neill has sought to maintain growth and replace the legacies of environmental disasters, mine closures and corruption with a new-found willingness to work with foreign companies.

In a bid to combat bribery and misallocation of foreign investors’ funds, O’Neill has promised to establish an independent anti-corruption authority during the first session of parliament in 2013.

“No-one involved in corruption and fraud should feel safe,” he told a mining conference in Sydney aimed at drumming up foreign investment.

The scale of the resource projects that are in operation means they have an outsized influence on the $10 billion economy. Exxon’s PNG LNG project alone is expected to boost GDP by 20 percent at full production in 2015.

Last month, Exxon Mobil upped the estimated cost of the project by $3.3 billion to $19 billion.

Of that delays from work stoppages and land access issues accounted for $1.2 billion to the total.

Landowner protests against the project this year prompted the government to deploy troops to restore law and order, according to local media reports.

Also, the impact of above average rainfall for most of the last two years, was estimated to have added $700 million.

“When we started this project we were under no illusion of the road ahead,” Exxon Mobil’s project executive for PNG LNG, Decie Autin said