PNG govt to take charge of OK Tedi funds

Eoin Blackwell | AAP

THE government of Papua New Guinea will restructure the management of the Ok Tedi copper mine to ensure its funds are managed in PNG and not in Singapore, Prime Minister Peter O’Neill says.

In a two-page article written by the PM in Port Moresby’s Post Courier newspaper on Tuesday, Mr O’Neill vowed to end what he termed “secret arrangements” between the mine’s former owner, BHP Billiton, and the PNG Sustainable Development Project.

The PNGSDP was created by BHP in 2002 to manage OK Tedi’s profits on behalf of the people of Western Province, following massive environmental damage caused by the mine.
OK Tedi’s mining lease expires at the end of 2013.

“When the lease expires, the national government will put in place management arrangements that end any secret arrangements, and ensure that the people of Papua New Guinea, including the local landowners, have a say in the mine’s future and its management,” Mr O’Neill said.

“We will ensure the PNGSDP is managed in Papua New Guinea, and its funds are held in Papua New Guinea, and used transparently for the good of the people of the Fly River Province, and the nation generally.”

The $US1.4 billion ($A1.35 billion) PNGSDP fund is currently held in Singapore, where the company is registered.

Mr O’Neill wrote the article in response to a Fairfax newspaper column last week which described the PNGSDP as “by far the biggest act of corporate philanthropy in Australian history”.

BHP had nothing to be proud of, Mr O’Neill said.

“Nor can BHP be proud of its majority ownership and managerial control prior to 2002 when it divested itself of its majority shareholding, and pretended – and I use the word advisedly – to end its control over the mine,” he said.

“The establishment of the PNGSDP was designed by BHP to keep control of the mine, and the direction of its profits, principally through the PNGSDP, over which it clearly exercised effective control.”

Mr O’Neill said past claims by BHP that it had no say in running OK Tedi and the PNGSDP were untrue and that the company held effective control over the mine “through a myriad structures”.

In 2010 the OK Tedi mine was the largest single contributor to PNG’s tax revenues, to the tune of $US543 million.

In November, former chairman and noted economist Ross Garnaut resigned from the PNGSDP and was replaced by former prime minister Mekere Morauta.

Professor Garnaut was also banned from PNG by Mr O’Neill after he implied publicly that the government would not use the fund’s money wisely.

BHP announced in September last year it planned to no longer appoint board members to the PNGSDP.

Future directors would be chosen by the board, which also includes PNG government nominees.

However, it is understood BHP must agree to any changes in the core terms of reference under which the trust operates.

PNG’s national government and the provincial government of Western Province jointly own a 36.6 per cent share of OK Tedi, while the PNGSDP currently holds a 63.4 per cent stake.

Both the PNGSDP and BHP have declined to comment.

8 Comments

Filed under Environmental impact, Financial returns, Human rights, Papua New Guinea

8 responses to “PNG govt to take charge of OK Tedi funds

  1. Good luck to you sir, why not go for the easiest option. Take over OTML starting next year. Mine closure and take on mine life extension together with FRPG and the people? No?

    The PNGSDP is locked sealed and secured for the now and future people of WP… if you can’t control corruption in your house, how can you manage the magnitude of the PNGSDP cash?
    the people are better off as it is..

  2. Wesely

    Good point Stomphie.
    Can O’Neil get his hands on the PNGSDP funds?
    I don’t think so.

  3. The trust was set up exactly to safeguard the funds from sticky fingers and ensure that the people reap the benefits, on the other hand the funds were to remain as security for OTML and protect BHP against litigation. simple choice, breach the trust and forego for court action or let it go for the people of WP and PNG.
    Too much milk has been spilt to start crying now.. seems like we’re growing old but never growing up

  4. Visionary 2050

    Wesley, while the PM probably can’t get his hands on the funds in Singapore he can certainly prevent any more funds going into that account any time he wishes. Don’t why he hasn’t done it already!

  5. Wesely

    Well, O’Neil can’t do this until the licence is cancelled or lapses.
    He can’t cancel it so he will have to wait until it lapses.
    If OTML are aware of this they won’t (probably) undertake the mine extension in which case the mine will shut down in about 36 months.
    O’Neil will have to some how re-employ all the workers there to get the project back into operation.
    But the problem is that theotheassets of the Mine belong to OTML and not the government of PNG.
    Technically, right now, Ok Tedi is not te property og te government of PNG.
    Its’ not the PNG governments mine to do anything with.
    Such a dealing would otherwise amount to nationalization and thats a bit of a no-no in just about every nation in the world right now.
    O’Neil will just have to wait, then rebuild the mine from scratch, with no reserves and the certain knowledge that its entirely un-economic to recommisson it.

  6. Bob

    Wesley, obviously you haven’t spent enough time in PNG as the GoPNG can do whatever it damn well pleases with whatever resource project that sits in PNG. Obviously this might not be a good thing for the resource industry but there’s really nothing stopping it from happening.

    Would imagine this would make several outside spectators’ fuzzy little heads explode but at the end of the day the PM needs to do whats best for the country.

  7. Well how can O’Neill stop payments when OTML accounts are also kept in Singapore? ANZ PNG just keep the operations funds onshore, all major transactions are out of Singapore.
    All land lease arrangements are between the company and land owners, all assets belongs to the company. land leases have been extended for mine extension. OTML act still stands. is there a loop hole??

  8. Wesely

    Thats what I was also getting at Stomphie.
    Seems to have gone over te heads of a lot of people
    Seems to me that very soon OTML will just be a huge financial and enviromental liability…..and then the inevitable disaster.

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