MAC: Mines and Communities

Papua New Guinea PM eats his words

Published by MAC on 2011-09-19
Source: PNG Minewatch

O'Neill promises to back minerals' industry

In what amounts to a virtual 360 degree turn, Papua New Guinea prime minister, Peter O'Neill, has assured Australian investors that his government's proposed new minerals' legislation - which on the surface returned sub-soil rights to indigenous landowners - won't impact negatively on the country's mining industry.

Last week O'Neill promised that his government was "not about making life difficult for foreign investors, especially those that have invested millions of dollars in speculative exploration and later to develop and underpin emerging world class mining and hydrocarbon industries in PNG."

On the contrary, he said:"My government respects the principle of finders keep and finders share ... I have cautioned, and will caution again, my ministers and State-owned corporations, involved in the mining and hydrocarbon industry, to desist promptly from giving misleading signals to the foreign investment sector.

"It is not my government's position to create insecurity, political risk or threaten foreign investment with expropriation."

MAC editors, in introducing the proposals on this site a fortnight ago, commented:

"Although the proposals have been enthusiastically received by many within the country, they aren't necessarily as ground-breaking as would first appear.

"...[T]he country's economy will continue to substantially depend on extraction of finite resources, and rely on capital and technical expertise imported from outside.

"...[R]ecognising land ownership "beneath the ground" does nothing to address the rights of those forced to "kaikai dust" (eat dust) or consume mining pollution more generally.

"Arguably, the state's recognition of subsurface mineral rights, while marking a significant advance in principle, would do little or nothing for such communities.

"Nor would it help Papua New Guinea's population as a whole escape from manifold aspects of the so-called ‘resources curse' "

See: Papua New Guinea earmarks mineral rights for its indigenous peoples

O'Neill clears the air on resource laws

Papua New Guinea Minewatch

11 September 2011

Prime Minister Peter O'Neill has used a speech at a Brisbane business luncheon on to reassure foreign investors that it is business as usual in the mining and petroleum sectors in Papua New Guinea.

Thank you, Sir Rabbie Namaliu, Frank Kramer and your team from Kramer Ausenco and Norton Rose for organising this business luncheon.

I am honoured to have been asked to address this gathering of very important investment friends and development partners of Papua New Guinea today.

I see among you the who's who of PNG's mining and petroleum investment sector and I am proud.

It gives me an added pleasure, on this occasion, to be able to talk to you as the new executive head of a new government PNG's elected leaders created over a month ago. In fact, today marks the 38th day of the new government's existence in office.

I know you are all eager to hear what I have to say about my government's attitude to foreign investment in PNG under my watch over the next few months and beyond.

I know you have questions to ask in light of some early ministerial pronouncements with respect to equity participation and ownership issues in PNG's mining and hydrocarbon sectors in particular.

Let me say that I am here to put your questions and your curiosity to rest so that we can all move ahead to higher levels of understanding, progress and achievement hand in hand.

Change of Government

First of all though, it is only fair that I make a brief mention of the change of government and leadership in Papua New Guinea on August 02.

We changed the Somare-led government because it needed to be changed. That government lost focus on assertive and decisive political and government leadership.

Worse, it lost focus on the nation's budgeted national development and public investment programmes.

For seven months, since the beginning of the year, but more so in the five months, that my predecessor had left the leadership of the nation to an Acting Prime Minister, uncertainty reigned. Chaos was not too far away.

Political instability crept in. Corruption and misappropriation of hundreds of millions of Kina for budgeted national development and public investment programmes became the order of the day.

Our situation was not helped when a small group of Ministers closely linked to Sir Michael Somare and the National Alliance Party became reckless and did as they pleased in the Grand Chief's prolonged absence on account of his illness.

The government of Papua New Guinea had effectively been "hijacked" by this small group of Ministers, who used and abused the serious illness of the then Prime Minister to subvert the parliamentary and cabinet processes and abuse public funds and property.

Public money became ring-fenced by these Ministers and used or abused as they pleased for programmes outside of those approved under this year's national budget.

Unstable political and government leadership mixed with reckless management of the nation's public finances was recipe for irreparable national dysfunction of major proportions.

In a nutshell, the former government led by Grand Chief Sir Michael Somare and his hand-picked former Acting Prime Minister Sam Abal had to be changed to save our nation from becoming the "Dysfunctional Blob" that our friends from this side of the Coral Sea love to describe us.

My friends, 70 Members from both sides of the political divide in Papua New Guinea's 109-Member Parliament could not have been wrong when they overwhelmingly voted to "correct a correctable" political and government leadership impasse in our country.

That impasse was undoubtedly starting to harm our national integrity, development and services delivery and importantly, investor confidence.

Under our system of government, Prime Ministers are chosen and removed by the National Parliament. The Head of State has no role, no reserve powers.

We used the inherent lawmaking authority of our Legislature as one of three arms of government within a democratic framework to underpin the parliamentary change of government.

The process is being tested in the courts. We uphold the rule of law and we respect our legal, and our constitutional processes. It is a pity the former government did not do so. Had it done so the events I have outlined would not have been necessary.

Let me summarise the position. I lead a properly constituted government; it has a strong and coherent parliamentary majority. And its blends experience, competence, and integrity, with youth and enthusiasm.

It is probably the most experienced and qualified, and broadly based and representative, government in our history as a nation.

Early indications are that most Papua New Guineans are happy with the change of leadership and government.

We have moved swiftly to complete a number of unfinished legislative businesses of Parliament and are functioning assertively and decisively to cleanse the system of corrupt elements.

My government has already established an investigative team to probe various financial abuses including the disappearance of millions Kina of PNG's development budget for 2011 in the first quarter of this year.

Challenges and Moving Forward

Let me move on to some of the challenges - and opportunities - we face as a government.

One of my first challenges as Prime Minister is to address corruption and the abuse of public money.

In the short term we have appointed an investigator to quickly examine suspicious financial transactions that occurred outside the proper processes during the final months of the last government.

But in the medium term we will do what should have been done years ago - establish a well-resourced Independent Commission against Corruption. That was one of the first commitments of my new government.

The best way to wage war against corruption is to significantly increase the prospects of detection, and successful prosecution. That is what the new commission will be charged with doing.

The current system is simply not working. It has not been working for years.

My government faces enormous challenges in improving basic service delivery, and in rebuilding and expanding vital national infrastructure - such as roads ports and electricity.

This is the infrastructure you and other investors need to effectively develop our vast mineral, oil and gas resources in particular.

Money is not really the problem. The capacity to spend it effectively is.

We have serious public sector capacity and delivering problems. Devolving delivery to local communities, and using the resources of our churches and NGO's , is helping to improve service delivery.

But there is a long way to go. Time is not on our side. The national elections are less than a year away, but we will use every day between now and then to try and address some of these great challenges.

Investor Confidence

Let me now turn to the issues you all want to hear about today. Papua New Guinea needs foreign investment dollars.

I say this without a shadow of doubt and with all sincerity. I am realistic enough to also say that wanting foreign investment and expecting it on a golden platter is not a one way street. Yes, it's a two-way street. We give to you as well as you give us.

In the first few days of coming into office, a number of statements pertaining to the various equity and ownership positions were made by a number of my ministers.

Let me reassure you that the goal-posts have not been shifted and relocated.

The playing field remains the same and shall be maintained that way for the foreseeable future.

In the mining industry, the applicable law provides for 30% equity for PNG to take up in any new mining project.

Similarly, the equity position provided by the PNG Oil and Gas Act provides a 22.5% equity stake for PNG.

The PNG government, affected provincial governments and landowner communities share these equity and other benefits provided under the respective applicable laws.

If local interests demand higher equity position for landowners and provincial governments, the onus is on the National Government to resolve such demand from our equity position as stipulated by the Mining and Oil and Gas Acts respectively.

We can also make adjustments under the applicable tax regimes to reward provinces that host these multi-billion dollar mining and petroleum projects with some percentage of tax benefits derived from these projects.

The most-important agenda of my government, with respect to the mining and petroleum industries, is to create an enabling environment within which projects can be developed peacefully and benefits and multiplier business opportunities derived thereof are shared fairly among all stakeholders.

There is no need at the present time to destabilise mining and petroleum industry developers and investors with a law designed to compromise or reduce their present respective equity position.

The applicable laws have not changed. Changes may and will occur in the future but they will have to be driven by a win-win formula for all stakeholders in a predicable manner.

These changes - when they are desired and when they do occur - will take place with and after comprehensive dialogue and discussion with you and with all other affected parties including landowners in Papua New Guinea.

Let me also reassure you that my government is about being inclusive right across the board on all matters of national affairs.

And that includes all aspects of the foreign investment and natural resource extraction industries sectors in PNG.

My government is not about creating sovereign risks for my nation's foreign investment and development potential.

My government is not about making life difficult for foreign investors, especially those that have invested millions of dollars in speculative exploration and later to develop and underpin emerging world class mining and hydrocarbon industries in PNG.

My government respects the principle of finders keep and finders share. That is the spirit within which we will, and we shall all operate under my watch.

I have cautioned, and will caution again, my ministers and State-owned corporations, involved in the mining and hydrocarbon industry, to desist promptly from giving misleading signals to the foreign investment sector.

It is not my government's position to create insecurity, political risk or threaten foreign investment with expropriation. Some of these negative signals have been made since my government took office.

I will vigorously investigate this deception targeted at the progress of the two multi-billion dollar LNG projects and take corrective action in the coming days.

Let me reiterate in the strongest terms that I lead an inclusive and consultative government that will not fall back on the bad habits of governments that have been in power previously in PNG.

I am serious about the bigger interests of the nation - not corruption and vindictive personalised agenda of my ministers or persons who seek to actively use my ministers to further their deceptive agenda in the mining and petroleum industries in particular.

Mining Sector

We have world class gold, copper and nickel resources.

Ok Tedi gold and copper mine has been a mainstay of the PNG economy since independence.

Lihir gold mine has been a strong performer for our economy.

Wafi gold prospect has the resource potential to be the biggest gold and copper mine in the Southern Hemisphere.

This will further boost the PNG economy in the next 20 years. It will be a significant contributor to the government's coffers in the future.

Ramu nickel mine adds significant weight to the mineral resource boom now taking place in PNG.

Hydrocarbon Sector

The two multi-billion dollar LNG projects - PNG LNG being developed by a consortium led by ExxonMobil and Oil Search Limited and Gulf LNG, being established by InterOil Corporation and its partners - both world class projects.

These are projects with potential to create revenue in-flows for PNG like never before.

On August 9, I stated in my initial policy statement that every effort will be made by my government to assist these two projects to meet their initial production timelines in 2014.

My position has not changed. I will ensure there are no political and bureaucratic interference in their progress.

All dealings with regard to these two projects shall be transparent and predictable. The importance of these two projects can neither be overstated nor understated.

To give these projects the prominence they deserve, I will dedicate a senior member of my staff in the coming days as a direct link in my office, whose job it will be to actively liaise directly with the responsible ministry, department and LNG Facilitation Office to ensure this two projects are not hampered in their progress by political and bureaucratic nepotism.

The PNG LNG project needs all the help that my government can give, and we shall do that as a matter of priority, to address all outstanding landowner issues and resolve them so that there are no further delays in progressing this project to production.

Similarly, my government will not tolerate any interference designed to delay progress of the Gulf LNG project. Gulf LNG is nearing a Final Invest Decision by the end of this year and all assistance will be given by my government to fulfil all their requirements to arrive at FID.

I want to see these two projects developed together.

Respecting Foreign Investment

In concluding, my government respects the commitment of foreign investment companies that have stayed loyal to PNG in both the good and bad economic times PNG has face since the early 1990s.

We welcome new foreign investment initiatives in our booming mining and petroleum sectors.

However, we would like to see that new investors and returning investors respect those that are already operating in PNG. We would like to see that potential investors come through the front door with their goodies.

In all sincerity, the last thing we all want is to destabilise existing well-meaning investors who have long-haul interests and commitment as PNG's development partners.

My government believes in being predictable and forthright in our dealings with all foreign investors in our nation's various natural resource sectors.

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