Governments’ share from natural resources sector declined: Institute

The National aka the Loggers Times | July 30, 2019

THE Institute of National Affairs stated in a seminar recently that the Papua New Guinea governments’ share from its natural resource sector has declined in the recent years and seems low compared to other resource rich countries.

Facilitating the seminar was visiting lecturer in economics at the school of business and public policy associate professor Martin Davis and department of economics at the Lebanese American University, assistant professor Dr Marcel Schroder. Davis said data from the Extractive Industries Transparency Initiative’s (EITI) annual reports from 2006 to 2017 was used to analysis the governments’ take from the resource sector by using a simple theoretical model to compare PNG and other resource rich developing countries.

Schroder said from the data collected there had been a decline in the State’s take over the last 10 years and that last year it had been very low for international standards. He said the two factors that may have caused the decline was the price of the commodity and the other was when there was a lot of new projects in the country, the governments’ revenue seemed to decline.

Schroder said the maturity of a resource project for example the liquefied natural gas (LNG) project which came in 2014 boosted the resource gross domestic product significantly but since it is a new project, the government could not expect to receive a lot of revenue from it yet.

He said PNG was the only country in their database of 50 countries where the government received large payments of salary and wage tax and that corporate income tax and royalties seem unusually low.

“The maturity of a resource project for example the LNG project is fairly new and this projects tend not to generate much profit at the beginning so the government does not receive much revenue from this new projects, they come later as the project matures,” he said.

“PNG is a developing country which means funds for crucial spending such as infrastructure, health and education are needed today rather than tomorrow.”

“Therefore, avoid deals with multi-national companies that lead to extreme back-load of fiscal take and that the government should also avoid giving many incentives.”

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Pundari Cautions KPHL Against Confusing Public, Private Monies

Post Courier | July 31, 2019

The Public Accounts Committee chairman Sir John Pundari has cautioned Kumul Petroleum Holdings Limited management against confusing public funds with private revenue.

He said this yesterday following a letter from KPHL director Wapu Sonk outright rejecting to meet with the permanent parliamentary committee and present their audit reports.

In a media statement yesterday, Sir John said that KPHL needed to identify the clear distinction between the two different types of funding and subject themselves under the same scrutiny as other statutory bodies.

He said that as an organisation which was instituted by the Independent State of PNG (by operation of the Kumul Petroleum Authorization Act 2015), KPHL was subject to scrutiny by the Public Accounts Committee.

Sir John that the overarching consideration in the matter was the Constitution. And that in the event of any contradictions with other laws, that applicable provisions within the Constitution naturally overruled these contradictions.

“KPHL merely collects on resources (property) owned by the people of Papua New Guinea and this is where the mandate of the Public Accounts Committee kicks in. The Public Accounts Committee’s key function is to examine and report to the parliament on the public monies and property of Papua New Guinea,” said Sir John.

“This is a constitutional mandate under Section 216 of the Constitution, the mother law hence any other laws whose provisions are contrary to the Constitution is invalid to the extent of that contradiction.”

This statement was made following a recent statement by KPHL chairman Andrew Baing that KPHL was a government business governed by its own laws, and was not subject to the Public Finance Management Act.

The ongoing stalemate between the Public Accounts Committee and KPHL reached a head last Wednesday when the PAC gave KPHL two weeks to produce details of liquefied natural gas (LNG) shipments and payments since the first delivery in 2014.

‘Urban mining’ can save the deep seabed from exploitation

Collecting copper wires from a dismantled washing machine in the Philippines (Image: Greenpeace)

Improved recycling and a circular economy negates the need for costly and damaging mining of the deep seabed

Natalie Lowrey, Dr Helen Rosenbaum | China DialogueJuly 29, 2019

The world’s first deep-sea mining project to be given an operating licence – Nautilus Minerals’ “Solwara 1” project off Papua New Guinea – appears to have ground to a halt in the face of concerns about its environmental impact and community opposition, culminating in legal action and public appeals to the new national government.

With a resulting lack of investor interest and the loss of its production support vessel last year, it’s difficult to see what the company might now achieve. In its wake, Nautilus has left the Papua New Guinea government facing a debt equivalent to one-third of the country’s annual health budget for its nine million people. The fate of Nautilus should send a warning to investors, and nations considering joint ventures with companies.

Early investors jumped ship to form DeepGreen Resources, which is working hard to build its image as a cleaner source of minerals than companies like Nautilus, which aspire to mine hydrothermal vents, or land-based mining companies. Their website describes a sanitised vacuuming up of mineral-rich nodules sitting on the seafloor and claims they will provide “clean metals” for a “sustainable planet”. However, comparisons between the impacts of seabed and terrestrial mining have been shown to be fraught and readily misconstrued by vested interests.

Next year, a little-known UN agency, the International Seabed Authority (ISA), is expected to open up the high seas to mining. The body, which is based in Kingston, Jamaica, is due to finalise its mining code: a set of regulations for exploiting the sea floor in international waters. The ISA has already completed regulations and recommendations for exploration. These have enabled it to grant 29 exploration licences in international waters.

While there is intense interest in the future financial returns that may be available through seabed mining, no commercial seabed mine has yet been established. Thus far the industry remains a speculative and experimental activity driven in large part by commercial and geostrategic competition, as states consider ways to secure access to rare earth minerals that may become increasingly valuable.

In reality, little is known about the impacts of nodule mining. What is known points to serious and irreversible impacts on marine ecosystems. Industry narratives also totally ignore the rights of maritime communities to maintain their social, economic, cultural and spiritual connections to their oceans. They omit the fact that the minerals they seek to exploit – cobalt, nickel, copper, manganese and rare earths – are finite even on our deep seabeds. 

Interest in alternative sources of minerals is growing among civil society, scientists and companies, with work being undertaken towards “urban mining” and the shift to a circular economy.

The circular economy describes an economic system grounded in “cradle to cradle” product design, reconditioning, waste prevention and closed-loop production processes. In response to the momentum, several companies have already put circular economy principles into practice. 

Apple announced in 2017 it would “stop mining the Earth altogether” and the European commission has introduced a circular economic framework. Interestingly, the European parliament has called for a moratorium on deep-sea mining until the need for it has been proven, as have prominent scientists, academics and civil society organisations.

There is already investment in urban mining, which is the process of “reclaiming compounds and elements from products, buildings and waste”. A staggering 320 tons of gold and more than 7,500 tons of silver estimated to be worth $US21 billion is used annually to make personal computers, mobile phones, tablets and other electronic products worldwide. There is an abundance of gold, silver, rare earths and copper in the waste generated by the disposal of these products. It is estimated that electronic waste contains precious metal “deposits” 40 to 50 times richer than the ores currently mined.

Urban mining could be more lucrative as well as dealing with an otherwise intractable waste problem, while at the same time capable of meeting future global mineral demand.

The choice for all of us, including investors, should be clear – and in fact is a “no brainer”. On the one hand there are the financial, social and environmental risks of deep-sea mining. On the other, there is the financial, social and environmental win-win of a metal resources future which focuses on urban mining and the transition to a circular economy, in which virgin mining plays only a minor role.

PNG turbulence dampens Newcrest’s bumper gold harvest

Peter Ker | Australian Financial Review |  25 July 2019

Newcrest Mining’s most important growth project is facing indefinite delays on the back of political turbulence, with the miner redeploying staff in the expectation its US$2.8 billion ($4.01 billion) Wafi-Golpu project will be delayed.

The scaling back of work on Wafi-Golpu came as Newcrest’s gold production in the year to 30 June rose to the highest level since fiscal 2011.

 Political unrest in Papua New Guinea has prompted Newcrest to scale back its work on the project, which is located in the highlands of Australia’s northern neighbour.

 Development schedules for the project had always been uncertain, with Newcrest for years telling investors that construction would take 4.75 years beyond the awarding of a special mining lease.

 That special mining lease has continued to be elusive, even after Newcrest dramatically updated its plans for the project in February 2018.

 On Thursday, Newcrest was pessimistic about the chances of progress at Wafi-Golpu any time soon.

 “Recent developments in PNG have resulted in a delay to permitting,” said Newcrest.

 “These developments include a period of internal political contest culminating in the parliament’s election of a new Prime Minister as well as the delay associated with the legal proceedings between the national government and the Morobe provincial government regarding the internal distribution of PNG’s economic interests in the project.”

 Newcrest said those developments had convinced it to “defer and revise” the work program it had planned for the coming year.

 “The project team in Brisbane has been redeployed and reduced in order to mitigate the costs of the delay,” said Newcrest.

 “It is difficult to estimate the duration of this delay.”

 The rise of James Marape to become PNG’s new Prime Minister has raised concerns for some resources companies operating in the nation, with Marape vowing to “take back the economy”.

 “Who says one conglomerate from outside can come and tell me I can’t change the laws for my country,” he said in May.

 “I have every right to tweak and turn resource laws. We are all about maximising resources for our country.”

 Newcrest already operates the Lihir gold mine in PNG, while gold miner St Barbara also operates there.

 Oil Search, Santos and ExxonMobil have gas interests in the country.

 Aside from royalties and taxes, PNG may become an equity investor in Wafi-Golpu, given it has an option to buy up to 30 per cent of the project at a price determined in reference to sunk costs on development of the mine.

 If PNG takes up that option, the respective 50 per cent stakes held by Newcrest and its partner Harmony Gold would fall to 35 per cent.

 The continuing delays in PNG will raise doubts over whether it can be Newcrest’s next major growth project, particularly with the miner close to completing the acquisition of a controlling stake in Imperial Metals Red Chris mine.

 Newcrest produced 2.48 million ounces of gold in the year to 30 June, a 6 per cent improvement on last year.

 It was also Newcrest’s biggest production result since it produced 2.7 million ounces of gold in 2011; the last year before the Mt Rawdon and Cracow mines were divested into what would become Evolution Mining.

 Prices for gold in Australian dollar terms reached a record high of $2049 per ounce in the past month.

 Gold was fetching $2040 per ounce on Thursday, having been bolstered by sliding interest rates and geopolitical tensions between the US, China and Iran.

 UBS had expected Newcrest to produce 2.47 million ounces of gold in the year at an all in sustaining cost of $US740 per ounce.

Details for Revised Mining Act Ready for Parliament

Melissa Yafoi and Matthew Vari | Post Courier | 29 July 2019

Details of the revised Mining Act will be presented in Parliament next month where Minister for Mining Johnson Tuke will also present an account of the mining sector in the country

Secretary for the Department of Mineral Policy and Geohazard Management, Harry Kore, said last Thursday.

Mr Kore said they are reviewing the Mining Act and have been directed to submit the Act in the next Parliament sitting.

“The revised Mining Act will go to Parliament in September this year.

“So as for the Mining Act, last year we introduced the Mineral Resources Authority Act and we are currently working in collaboration with MRA to revise the Mining Safety Act.

Our Act is as old as 1977 so we try to update it with the latest technology and advancements that is happening so we try to bring our act up to par with what we have internationally,” he said.

Mining Minister Johnson Tuke said the Mining Act is mostly colonial and a review is long overdue.

“I am promoting that in the coming (parliament) session. We’ve conducted our due diligences, we’ve visited all our agencies and it’s been on the shelf for the last six to seven years. I think this is prime time we have to do this.

“In the coming session also I might be able to update PNG on the status quo of all our mines but our engagement with Wafi-Golpu has came to a halt and it’s now before the courts so we will not comment on that,” he said.

Meantime PNG Chamber of Mines and Petroleum president Gerea Aopi told the 35th Australia PNG business forum in June that the mining industry would remain a strong supporter for development in the country, highlighting the 26 per cent contribution to GDP and 80 per cent of national export revenue.

“The sector also provides more than 20,000 jobs to Papua New Guineans, whilst 30,000 more are employed in landowner businesses, and other PNG businesses that support the industry,” Mr Aopi said.

He said in order for the industry to continue supporting and growing the national economy, there needs to be stabled and predictable government policies and a favourable investment climate that underpins PNG’s investment attractiveness, clearly in reference to the proposed review to the mining act.

Recent statements also from government also highlighted tax income with Prime Minister James Marape urging major players in the mining and petroleum sectors to pay their “fair share of tax”.

A point which the chamber pointed out that its members pay corporate taxes, royalties, dividends, and also employee taxes on their wages, totalling to over K1.5 billion representing over 16 per cent of the total K9.1 billion tax revenue collected by the government in 2017 alone.

“While we support the government’s vision to increase the country’s revenue, we must remember that the resource industry has always been a strong contributor to PNG’s development and that the industry has always complied with taxation laws by paying its fair share of taxes,” the chamber announced in a statement earlier this month.

Bougainville veterans reconcile, commit to referendum

Inside the pit of abandoned Panguna mine

Don Wiseman | Radio New Zealand | 27 July 2019

A summit of huge significance for the future of Bougainville has taken place over the past week, in and around Panguna.

The focus of the Bougainville Me’ekamui and Veterans Summit was a reconciliation between former combatants in the region, and came just months out from a referendum on independence from Papua New Guinea.

It involved former combatants from both sides of Bougainville’s brutal civil war of which the referendum is one of the ultimate expressions.

The groups issued the Mary, Queen of the Mountains – Panguna Declaration.

This includes commitments to the referendum, to maintain peace and stability before and after the referendum, the disposal of weapons, and agreement that the Panguna mine can be re-opened after the vote.

Weapons Disposal

The summit attendees, now known officially as the Bougainville Veterans, aim to have guns held by former combatants and civilians contained by 15 August, with an ultimatum that the collection process be completed by 1 September.

The verification of the guns will be done by the Bougainville Police Service, working with community governments and veterans.

Eventually these weapons will be destroyed and a monument created from them.

Bougainville Peace Agreement ceremony in Arawa in August 2001 Photo: RNZ Walter Zweifel

Referendum

The vote was to be held from 12 October, having already been moved from June, but the Bougainville Referendum Commission had been seeking an extension of six weeks.

This has now been agreed to by the Bougainville Veterans, but they say the referendum must happen by 30 November at the latest.

Further Reconciliations

The veterans have urged additional reconciliations. They want to reconcile with PNG security forces – the army, police and prison services.

They also want the leadership of the two governments, Bougainville and Papua New Guinea, to reconcile before the ratification of the referendum outcome.

The veterans also say reconciliation with neighbouring Solomon Islands is a priority and are seeking donor support to facilitate this.

Bougainville government president John Momis, left, and Papua New Guinea Prime Minister Peter O’Neill sign the agreement on the question for the independence referendum. Photo: Joseph Nobetau

Economic Development

How to grow the Bougainville economy has long been debated in the region.

Several groups have been eyeing the re-opening of the controversial Panguna mine, which was forced to close 30 years ago at the start of the 10 year civil war.

Environmental and social damage caused by the mine sparked the conflict.

The veterans have agreed, however, the mine can be re-opened after the referendum. But because of the sensitive nature of the matter, public debate and discussions should be discouraged until after the vote.

Any decision on how mining might proceed will also wait until after the referendum and not before appropriate legislation on land, the environment and conservation is put in place.

At its peak, the mine produced almost half of PNG’s export revenue and is still considered to contain one of the largest copper reserves in the world.

The Bougainville Veterans also talked about the importance of investigating other options for fostering economic development, such as fishing and agriculture.

Amnesty

The Bougainville Peace Agreement, signed in 2001, included provisions for amnesty for all persons involved in crisis related activities or convicted of offences arising from them.

In the Mary, Queen of the Mountains – Panguna Declaration, the Bougainville Veterans say these provisions must be extended to beyond 2020 and include members of the Me’ekamui factions as well as other groups and individuals who join in the gun disposal programme.

Total’s PNG Gas Plan Faces Fresh Test as Deal Changes Proposed

Logo at French oil and gas company Total gas station in Marseille, February 11, 2015. REUTERS/Jean-Paul Pelissier

Stephen Stapczynski | Bloomberg | July 26, 2019

Papua New Guinea’s petroleum minister said he’s completed his review of a recent natural gas agreement with Total SA and will recommend changes, creating a potential hurdle for the delayed $13 billion effort to double the nation’s exports of the fuel.

The potential changes cover both regulatory and commercial terms of the so-called Papua LNG agreement and must be approved by the National Executive Council before submitting them to venture partners, which include Exxon Mobil Corp. and Oil Search Ltd., Kerenga Kua said in an interview Thursday.

Kua said he’ll send his findings as soon as Monday to the council, a top policy making body, and expects a revised agreement with the companies completed within six weeks. In response, Total’s Chief Executive Officer Patrick Pouyanne pushed back against any potential overhaul.

“All issues are capable of discussion and compromise,” Kua said. “Even though we may have our wish list and they may have their wish list, finding the middle ground where all of us can benefit is an important principle.”

Oil Search shares added 0.6% to A$7.09 as of 10:43 a.m. in Sydney and are headed for a 6.3% rise this week. The Australia-based producer declined to comment. Exxon didn’t respond to requests for comment.

“We are confident that it’s in the best interest of PNG to respect the agreement that has been signed in order to move forward with the project,” Pouyanne said on a conference call Thursday. “We expect the new government to respect” the deal signed by its predecessor, and Total has “many” LNG projects in its portfolio.

Political Flash-Point

Separately, Newcrest Mining Ltd., Australia’s top gold producer, and Harmony Gold Mining Co. said they are facing a hurdle with the development of the $5.4 billion Wafi-Golpu gold-copper project in PNG amid heightened political uncertainty. The delay in permitting is associated in part with legal proceedings between national and provincial authorities and the PNG government continues to signal support for the project, Newcrest said in a statement Thursday.

Liquefied natural gas exports have developed into a political flash-point for the country as its existing venture, the Exxon-led PNG LNG project, has been criticized as not benefiting the domestic economy as much as expected. The nation’s new prime minister, James Marape, swept to power in May amid a wave of criticism of the Papua LNG deal signed by his predecessor. He tasked Kua with reviewing the agreement after appointing him petroleum minister in June.

“For too long we have allowed external forces to dictate the direction we take,” Marape said Thursday at the Lowy Institute in Sydney. The government must work with its partners “to ensure a fair and equitable distribution of our resources.”

In the interview, Kua described the suggested changes as a “short list,” but declined to provide specifics. He said he’s been in communication with the partner companies.

“We haven’t rejected the signed agreement,” he said.

The review has delayed plans to double gas exports from Papua New Guinea, which involves a $13 billion expansion across separate but interlinked projects. Talks on the second gas agreement, for the Exxon-led P’nyang venture, won’t begin until the Papua LNG deal is revised, Kua said.

Oil Search said last week that it expects front-end engineering and design work on new LNG production units to be pushed back pending those agreements. That may move a final investment decision until as late as 2021, which puts the expansion projects at risk of greater competition for building resources and customers, according to analysts at Sanford C. Bernstein.

Marape said his government assembled a group of advisers to assess the country’s resource laws to find the right balance between encouraging foreign investment and boosting local involvement in the sector.

LOs Call For Unity On Mine License Renewal

Post Courier | July 26, 2019

Leaders and landowners of the Porgera Gold mine in Enga want Prime Minister James Marape to visit the mining district to get views of mine communities before the mine’s lease agreement expires next month.

They are also calling on the various landowner factions operating outside Porgera to return and consult with the people on the ground so a collective and proper position paper, representing the interests of the people can be presented to the national government.

Landowners of the Porgera special mine lease (SML), lease for mining purpose (LMP) and mining easement communities aired their concerns in Porgera last week.

They included chairman of the Ipili Porgera Investment (IPI) group of companies, Jolson Kutato, President of the Porgera women in business (WiB), Elizabeth larume, president of the Porgera Chamber of Commerce and Industry (PCCI) Nickson Pakea, former president of the Porgera LLG and former deputy governor of Enga, John Pawe, SML leaders William Gaupe, George Yope and Mathew Yapala, Paiam ward member Perale Kana, SML councilor Sukul Tupia, Porgera District Women’s Association leader Wanoli Waiyape and SML landowner Arnold Kulina.

The landowners have called on the Prime Minister not to entertain any landowner faction groups operating from Port Moresby but to go to Porgera and directly consult with mine landowners.

“We are here and our position will be addressed here in Pogera and the government will receive our position paper in Porgera.

“Ongoing in fighting by landowner faction groups is causing confusion amongst the genuine landowners so the Pogera Landowners Association (PLOA) and Porgera Jus-tice Foundation need to sit down , iron out differences and properly discuss issues relating to the mine review with the Pogera people,” Mr Pawe said.

Mr Kutato who led the 1999 mine negotiations then as chairman of the landowner association said there are a lot of side issues the landowners need to fix before the mine lease expires.

He said landowners must take the review process very seriously if they are concerned about the future of their children because this will be the only time to renegotiate long-term benefits but nothing will be achieved if there is still division.

“The Prime Minister must listen to the concerns of the people and come to Porgera because the landowners and leaders are here.
We will formulate our position paper as united landowners to go into agreement with the government and developer and this has to be in Porgera,” Mr Kutato said.

Review of Papua LNG underway, says Kua

The National aka The Loggers Times |July 26, 2019

PETROLEUM Minister Kerenga Kua says the review of the Papua LNG agreement signed in April is underway.

“The signatories have been consulted and informed and we have asked for the government to be given time to review the agreement and its impact and that is already being undertaken,” Kua told The National yesterday.

“By next week, I expect that Cabinet will approve any areas of concern that the State wants to put up for reconsideration between the signatories to the contract to commence the process of discussion between themselves. It will be short and sharp and we will be able to have a final position very quickly, maybe in the next three weeks or so.”

Kua made the comments at a public seminar in Port Moresby yesterday hosted by the Institute of National Affairs (INA) themed: “Does the PNG government get its fair share from the resource sector?”

Asked on what the concerns of the government were in the agreement signed in April, he said: “I am not at liberty to raise that issue at the moment but it will be a short list.”

INA director Paul Barker told The National yesterday that: “It seems that the former government was very keen on pushing that through the deal and in a bit of a hurry and there were a lot of money spent on consultants coming in to give advice.

“Some people have said to me that if they just followed the law, then they could not have gone too far wrong, but instead they wanted to do special deals and special arrangements and it was the government pushing some of those special arrangements and if you do shortcuts and you rush things, invariably that creates problems for yourself in the longer term and as an investor.

“It is much better as an investor to make sure that everything down to the letter is done properly and I think in that case it was the previous government’s rush that caused the problem.”

The US$13 billion (K43 billion) Papua LNG project shares split: French energy company Total – 31.1 per cent, ExxonMobil – 28.3 per cent, Kumul Petroleum Holdings Ltd (state) – 20.5 per cent, Oil Search – 17.7 per cent, landowners – 2.0 per cent, and minor parties – 0.4 per cent.

Public Accounts Committee to investigate LNG proceeds

Rebecca Kuku | The National aka The Loggers Times | 25 July 2019

THE Public Accounts Committee wants to know where the proceeds from the multi-billion kina PNG Liquefied Natural Gas (LNG) project are.

It has therefore given the Kumul Petroleum Holdings Limited (KPHL) two weeks to provide the committee with information on the aggregate income generated from more than 500 shipments of LNG to overseas buyers since the first one in 2014.

Committee chairman Sir John Pundari, said they wanted KPHL to explain:

• How much has been has been made so far from the export of the liquefied natural gas;
• How much of that money had been given to the State and landowners;
• how much has been given to the provincial government of the affected areas for development and infrastructure; and,
• How much was used on KPHL’s cost of operation. 

Sir John said people had the right to know how much was made from the shipments of LNG and where the money was right now.

“KPHL is not a private business. It is not your money or my money,” he said.

“It is the people’s money. So why are we being secretive? KPHL belongs to the people and the Public Accounts Committee has the mandate to enquire.”

But KPHL board chairman Andrew Baing said it was a government business governed by its own legislations and was not subjected to the Public Finance Management Act as the other state-owned enterprises.

Baing said yesterday that he had said all he needed to say on the matter.

“I will comment later in the week after I consult my office and lawyers,” he said.

The committee wants KPHL to provide all the information by August 7, failing which officials will be summoned before the committee.

The first shipment of LNG from ExxonMobil PNG Ltd’s US$19 billion PNG LNG project left the country on May 25, 2014, carrying a cargo bound for Japan.

It was reported at that time that the cargo had been sold on the spot market to Tokyo Electric Power Company Inc.

Since then over 500 shipments of liquefied natural gas had been made.

The committee published a notice this month on its intention to hold an inquiry into the operations of KPHL.