Monthly Archives: November 2017

Abel: SWF vital for PNG

More promises that we have heard time and time before…

Salome Vincent | Loop PNG | 29 November 2017

The government has placed considerable importance in establishing the Sovereign Wealth Fund.

Today, Deputy Prime Minister and National Treasurer, Charles Abel, addressed the Mining & Petroleum conference, saying the Fund is a critical part of PNG’s medium term strategy in building the country’s economic resilience and saving for future generations.

The National Treasurer addressed a packed conference room, of the government’s observations on the mining and petroleum sector.

The notion to set up a Sovereign Wealth Fund stems from four key characteristics that shape how the government should think in driving the sector.

  1. The extractive resources are nite;
  2. The exploitation of the extractive resources represent a Liquidation of natural capital that is a conversion
    to nancial assets;
  3. It is a volatile sector;
  4. It generates rents.

The Minister said that there is surplus income beyond normal pro ts, adding that the rst two characteristics invoke considerations of equity both intergenerational and intra-generational.

He added that these attributes suggest the need to establish institutions that ensure the country does not waste wealth from natural resources.

And so to establish the Sovereign Wealth Fund, a work program for 2018 will involve the drafting and passage of various secondary legislations, the appointment of an inaugural board and establishment.

The board will guide the detailed design of operational systems and processes.
The other key institution is to design a scal regime to save and invest in ows from extractive resources.

“During the 2017 Supplementary Budget Government recognized that our nominal scal anchor – that is the headline target that guides the formulation of the National Budget needed to be augmented.

“I introduced an amendment to the PNG Fiscal Responsibility Act so it not only targets an eventual debt to G-D- P ratio of 30% but also aims to achieve a non-resource primary balance that averages zero over the medium term.”

Meantime, the extractive industry remains important to the economy with a direct contribution of 20 per cent GDP.

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O’Neill tells Papua New Guinea resources sector there will be no new taxes

Prime Minister Peter O’Neill announced no new resources sector taxes.  Source: Business Advantage International

David James | Business Advantage | 29 November 2017

Papua New Guinea’s Prime Minister, Peter O’Neill, told the PNG Mining and Petroleum Conference yesterday that there would be no new taxes for the resources sector. Meanwhile, presentations by the major industry players suggest the next 12 months will be critical in determining the future growth of the sector.

‘I believe we have emerged stronger,’ he said. ‘The global economy has turned the corner. We have maintained the faith and we can see light at the end of the tunnel.’

O’Neill claimed ‘it is time to invest in Papua New Guinea,’ pointing to the anticipated Total-run Papua LNG project, and the proposed Wafi Golpu and Frieda River mines.

‘This is not a time for us to make many changes but to maintain discipline.’

O’Neill said there is an upswing in the global economy and the commodity cycle, but he warned that the country cannot depend on it.

‘We cannot continue to over-rely on the mineral and petroleum sector to advance our goals,’ he said.

Cautious optimism

Business leaders presenting at the conference expressed cautious optimism about the prospects.

Andrew Barry, Managing Director of ExxonMobil PNG said the existing PNG LNG project is running above expectations. ‘We are on track to produce a total of 8.2 million tonnes of LNG this year, which is about 20 per cent beyond what we first thought the plant could achieve when the facilities were designed.

He said drilling at the Muruk field led to a new discovery near the Hides field. A K1 billion kina investment will be made next year ‘to tie the Angore field into the production system at Hides,’ he said.

Philippe Blanchard, Managing Director of Total E&P PNG said the company is well advanced in its engineering studies, field surveys and appraisals program for Papua LNG. He said the company has also begun to assess commercial viability, looking at the project structure, financing and the LNG market.

‘The environment is changing a lot,’ he said, adding that the company will need to see how to take advantage to get the best project.

Blanchard said integrating with established infrastructure is a complex task. ‘Our gas is very different from the gas in PNG LNG. We need to find the right elements between what is existing and what we want to build.’

Critical time

Peter Botten, Managing Director of Oil Search, observed that the ‘next 12 months is the most critical in all the years I have been here.’

‘The LNG market has never been more dynamic. We are also seeing some of the best exploration opportunities I have seen in PNG.

‘PNG LNG is a stellar world class project but there are legacy issues.’

Botten said the number of LNG-importing countries is expected to rise by 100 by 2020. He said there is strong demand in Asia, with demand in the first quarter of this year up by 37 per cent in China on the previous corresponding period, by 14 per cent in South Korea, by 12 per cent in Taiwan and by 9 per cent in Japan.

He said LNG is increasingly preferred to nuclear and coal.

Botten noted that there is a five-to-seven year investment horizon for new projects, and current planned activities are only likely to produce ‘about half of what is needed’.

‘The window is opening for new demand.’

New Mining Act

Botten added that about 30-35 per cent of LNG is now traded in the spot market, with large companies like ExxonMobil and Total building their own positions. He said it ‘changes the financing’ and the types of alliances that are formed.

Johnson Tuke, Minister for Mining, told the conference that a revised Mining Act is ‘now before the National Executive Council.’

Tuke said the mining sector has made ‘an impressive turnaround.’ The Wafi Golpu and Frieda River proposals remain a priority for the government, he said.

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Environmental and eco risk unknown in Cooks’ deep sea mining

Seabed mining machine

Dateline Pacific | Radio New Zealand | 29 November 2017 

The Cook Islands is exploring the benefits and potential of its deep sea resource.

Beneath the sunlit zones, where the country’s tourism and fishing industries lie, is a largely unexplored and untapped expanse of promise.

Also unexplored is the environmental risk and potential threat to other parts of the economy.

Dominic Godfrey reports.

Five kilometres below the surface of the Cook Islands exclusive economic zone lie manganese deposits which could provide a pathway to prosperity for the country.

The problem is not just getting them to the surface but the environmental impact this may have, as New Zealand’s principal ocean scientist Malcolm Clark explains.

MALCOLM CLARK: “The deep sea is a very poorly understood system. There are no boundaries in the oceans and so – coastal, continental shelf, deep sea, inshore, offshore – it’s all linked. And that’s especially important in the Pacific Island countries where we’re fairly small land-masses in the middle of a large ocean. So the connectivity across potentially quite large areas of ocean space is very important to understand.”

Dr Clark says while the actual area of mining may be small, the impact could encompass large areas.

MALCOLM CLARK: “In digging up these resources, there’s going to be disturbance of the sea bed and the sediment that’s been sitting idle is going to be demobilised and it will form a cloud. And that’s going to start to move with the currents, away from the area of direct physical impact. That’s an aspect that we don’t yet well understand but what the effect on the sea-floor communities, the sea-life, we’re not too sure at the moment. We’re working on that in a number of research programmes around the world.”

The co-ordinator for the Pacific Network on Globalisation, Maureen Penjueli, says the lack of understanding is a major concern as Cooks’ seabed legislation contains no reference to avoiding international harm.

She says the 2009 Seabed Minerals Act also has no provision for ‘precautionary principle’, where human activities could plausibly result in unacceptable harm.

MAUREEN PENJUELI: T”here was very little understanding about the potential impacts. There was an over emphasis on the potential economic benefits. So the legislations were set up under the broad narrative that seabed mining was considered small risk, very high return.”

Maureen Penjueli says it was drafted with no provision for the possible impact on tourism, fishing and black pearl farming.

MAUREEN PENJUELI: “When you consider that our economies are heavily dependent on the ocean – our people are heavily dependent on the ocean for livelihoods, food security – that’s quite problematic in terms of the current legislation.”

However, the country’s Seabed Minerals Authority commissioner Paul Lynch says ‘precautionary principle’ and environmental issues were front and centre to the original Act.

He says it was amended in 2015 and is under continual review with input from Ms Penjueli and PANG welcome.

PAUL LYNCH: “We’re very open to that but currently we’ve got the act out for review and we’re expecting that out to the community next year and into Parliament should there be any changes needed.”

But Mr Lynch says this year the Marae Moana Act was passed to provide an holistic umbrella to all aspects of the Cooks’ marine management.

He says it’s ground-breaking national legislation that has conservation as its main plank.

PAUL LYNCH: “With zoning for different users, like zoning for fishing, zoning for tourism, zoning for mining. Mining if it takes place in the future, it’s going to be quite contained and controlled based on a zoned management marine spatial plan.”

In zones beyond the Cook Islands in the north-east Pacific, mining projects are underway managed by the International Seabed Authority under the UN’s Law of the Sea.

The environmental organisation Te Ipukarea Society’s Kelvin Passfield says the Cooks should learn from these.

KELVIN PASSFIELD: ” I’d be inclined to wait and see what the environmental impacts outside of our EEZ were before allowing any mining within our EEZ. The Cooks can wait and see what happens in other jurisdictions or in the high-seas like the Clarion Clipperton Zone and determine what impacts there may be from them.”

PANG’S Maureen Penjueli agrees but points to Nautilus Minerals’ plans to mine Papua New Guinea’s Bismarck seabed.

MAUREEN PENJUELI: “If you simply take PNG as the case study, the Solwara 1 project, it is clear that impacts have already been felt. You don’t have to go into it to look at the impact, you can look at PNG.”

An annual report from the Canadian company shows both the environmental impacts and profits from the project are unknown.

In the Cooks, Texas based Ocean Minerals has 17 months left in its agreement to apply for manganese nodule prospecting and exploration licences but with weak global demand for rare earth minerals, the economics may not stack up.

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PNG landowners block access to gas wells over royalty disputes

PHOTO: Landowners in PNG’s highlands cut down trees to block roads near gas wells in Hela Province. (Supplied)

Eric Tlozek and Bethanie Harriman | ABC News | 29 November 2017

Armed landowners in the Papua New Guinea highlands say they have blocked access to gas wells because of an ongoing dispute with the Government over the payment of royalties.

The landowners in PNG’s Hela province have cut down trees and blocked roads and say they have stopped police from taking back control of the area.

They are demanding the PNG Government pay them outstanding royalties, which are the subject of a protracted legal dispute.

“They have cut down trees from wellhead B to G, blocking the roads,” said Dickson Ango, the chairman of one of the petroleum development licence areas.

“The security personnel have withdrawn and landowners have taken control of that area.”

Mr Ango said the landowners were protesting the PNG Government’s failure to pay a promised 20 million kina ($AUD8 million) in royalties for the gas.

“They promised to pay to the landowners — they even wrote a dummy cheque and gave it to the landowners — but that money was not in the account,” Mr Ango said.

“They showed us the cheque and they said, you see it, you feel it, you touch it and then they withdraw it and they never pay it to us.”

PHOTO: Landowners in PNG’s highlands cut down trees to block roads near gas wells in Hela Province. (Supplied)

The PNG Government has previously said it cannot pay royalties to some landowner groups because of disputes over clan vetting and an ongoing legal case.

It has been negotiating with landowners in an attempt to resolve the disputes and prevent unrest at the project and along the pipeline.

The operator of the PNG Liquefied Natural Gas project, ExxonMobil, said its production was continuing at normal levels, but it has withdrawn all non-essential staff from the area.

“ExxonMobil PNG is continuing to monitor ongoing tension in the Highlands (Hides, Angore, Komo) areas,” a spokeswoman said.

“Staffing at the Hides Gas Conditioning Plant remains at essential personnel only.

“The Hides Gas Conditioning Plant is operating safely at normal production levels.”

Police in Hela Province were not able to be reached for comment.

A spokesman in Port Moresby said officers there were trying to resolve an unrelated dispute involving the hijacking of trucks as part of a compensation claim over the death of a young man in a traffic accident.

Hela Province has been the scene of some of PNG’s worst tribal fighting over the past four years, with provincial authorities estimating at least 200 people have been killed.

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Supreme Court condemns PNG LNG as one of many ’large-scale frauds’

The Supreme Court has issued a stunning indictment of large-scale resource extraction projects in PNG, labelling them as ‘large scale frauds committed against the true and correct landowners’ in a judgement delivered on September 25.

The Court singled out the PNG LNG project for special mention as one where the State and the ‘developers’ have failed to obtain free and informed consent and a social licence for their operations.

The case before the Court concerned trespass and illegal use of customary land by logging giant Rimbunan Hijau, and the court endorsed an earlier award of damages of more than K6 million against the company.

But the Supreme Court decision goes much further in its examination of the issues of social licence and consent and concludes that many landowners around PNG are entitled to compensation from mining, logging and oil and gas companies for the ‘illegal entry, occupation and conduct of their businesses’ :

What happened here is in fact a sad story that is repeated throughout the country over a long period of time from the colonial administration in the name of opening up wild frontiers for various so called developments and projects. The so called projects and development covers from logging, prospecting for minerals and oil and gas to actual mining, to oil and gas developments to other customary land base developments like the famous or infamous Special Agriculture Business Development Leases (SABLs). What is happening in most cases is that, developers and the State alike are failing to either deliberately or by inadvertence to first ascertain, then properly organise, empower and deal with the properly identified and confirmed customary land owners. Rather than taking this most important first critical step, the State and the developers are entering customary land and are proceeding with their activities and in so doing, choosing to and are indeed dealing with persons who claim to be landowners when in fact they may not be the true and correct landowners… The State to the extent that it is doing nothing about this practice is encouraging this improper and illegal approach by so called developers which in fact is a large scale fraud committed against the true and correct landowners by the so called developers with the support of the State and in collaboration with persons claiming to be owners when they are not.

Kandakasi J., in his decision in the P’Nyang and Kanga Kawira cases correctly calls them “fraudsters and thieves.” As was noted by his honour in his judgments, the PNG LNG project presents a clear case on point. In this project, despite s. 47 of the Oil and Gas Act, both the State and the developers have failed to properly identify the true and correct landowners, properly organising them into ILGs, enable the landowners to fairly and meaningfully enter into negotiations with the developers and the State and for the developers and the State to seek and secure from the true and correct landowners through their duly elected or appointed leaders the landowners free and informed consent and approval and ultimately, their social license to operate. The contracts or agreements and the deals the State and developers enter into with persons not properly identified and appointed by the landowning clans, or groups, remain null and void ab initio or void and of no effect from the very beginning. Given that, when the true and correct owners eventually assert their ownership rights and exercise their rights, challenging the contracts or deals with the fraudsters and or thieves, they must give way. Such contracts do not bind the true and correct landowners. If need be, the State and or the developer concerned need to enter into completely new contracts with the true and correct landowners on terms that are fair and reasonable with reasonable compensation being paid for the earlier illegal entry, occupation and conduct of their businesses. 

Read the full Supreme Court decision – Rimbunan Hijau (PNG) Limited and Ina Enai (2017)

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Mining Incentives Cutting Revenue Sources

Post Courier | November 29, 2017

As the country still depends on the extractive industry, its current tendency to provide tax incentives in the forms of infrastructure tax credit schemes, tax holidays and other incentives will continue to affect its revenue sources.

PNG National Research Institute senior researcher, Dr Francis Odhuno, outlined this during discussions over the institute’s latest preliminary report on a leaner tax incentive policy in the extractive sector.

“In PNG, the mining, oil and gas, are the major taxpayers in the sectors. So the amounts they contribute are also huge in terms of the expected amount that the government should be collecting from them is sizable enough,” said Dr Odhuno.

“Once you slice a percentage off it and give them back the credit, and remember it is not only the infrastructure tax credit that they get, they also have other incentives. Some of them pay nearly nothing – a few of them pay a lot, but they don’t match the amount the government needs to spread out social services.”

Dr Odhuno suggested the government maintain its responsibility in the areas of service delivery and leave the private sector concentrate on its role.

“The question is after the company has done the infrastructure within its vicinity. How do we extend beyond that area? he said.

“Because other people who do not have resources where no major companies are operating in their areas, it’s likely they will be forgotten.

“But if the government collects the revenue and utilises it, then it should be equitably distributed. So the question is, why is the government advocating its role and giving it to somebody else whose primary mandate is not providing social services?”

Dr Odhuno said the need for monitoring was as important when substantial potential revenues are forgone for tax credit infrastructure development.

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Law and order at LNG site needs attention

Dug up highway near PNG LNG project gas plant

The National aka The Loggers Times | November 28, 2017

THE law and order issue at the LNG project site in Hela needs to be urgently addressed by the landowners, the Government and ExxonMobil, according to former Nipa-Kutubu district administrator Robin Pip.
It follows a roadblock set up by landowners from PDL1 (Petroleum Development Licence 1) in the Komo-Margarima district.
They want the Government to pay their outstanding K20 million.
Pip, also a former community affairs officer with ExxonMobil, said these issues should have been addressed before the gas production.
He said the government should have identified the genuine landowners and pay their royalties and equity accordingly.
Meanwhile, Komo-Margarima MP Manasseh Makiba presented a petition to parliament last Friday from the landowners reminding it to start the clan-vetting project and pay out the K35 million promised to them.
Makiba said the landowners of PDL 1, 7 and 8 wanted the government to address clan-vetting urgently and pay the K35m that was agreed to be paid to the landowners in a Memorandum of Understanding in August, 2006.
“The K35m and the clan-vetting was later approved in an NEC 2010/2016 decision allowing for the K35m to be paid out to the landowners and the clan-vetting to begin a week after,” he said.
“The NEC decision also tasked the Attorney-General to file applications at the National Court to set aside restraining orders. However, since then nothing has eventuated,” he said.

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