01 Dec 2021
Good morning delegates to the 2021 PNG Chamber of Mines and Petroleum conference. Welcome to this year’s conference.
Let me at the outset acknowledge and thank our Prime Minister, Hon. James Marape, and Australia’s Minister for International Development and the Pacific, Hon. Senator Zed Seselja for accepting our invitations to address this conference.
I would also like to place on record our gratitude to other speakers for accepting our invitation to address this conference.
The conference this year is different from other past conferences hosted by the Chamber. We have had to do a split site conference arrangement between Brisbane and Port Moresby due to the surge in Covid-19 cases in Port Moresby. Our original plan to do an in-person conference in Port Moresby was shelved and replaced with a virtual structure, and in-person attendance in Brisbane. It is a unique format for us – but these unique times that the world finds itself in has required everyone to adapt, even us.
At this juncture, let me acknowledge and thank all our registered delegates who are attending this conference virtually, as well as those attending at the Hilton Brisbane. There are around 100 here in Brisbane Hilton, and over 300 connecting virtually from Port Moresby, and from homes, offices and board rooms in Australia and around the world.
The two days’ conference ‘kicks off’ with the opening address by our Prime Minister, Honourable James Marape. With the theme of the conference ‘Resource Industry – Making it work for PNG’, the Prime Minister has been invited to address this forum on his government’s plans and vision for the hydrocarbon and mineral industry in Papua New Guinea.
Prime Minister, it’s wonderful to see you here, we thank you for your continued support for the industry, and we look forward to your address.
We are also honoured that Australia’s Minister for International Development and the Pacific, Hon. Zed Seselja, can address this forum through a pre-recorded presentation.
Executives from mining and petroleum corporations attending the seminar, investors and financiers in those projects, will also be interested in future policies that impact on PNG’s investment attractiveness and future exploration trends.
Industry leaders in PNG will provide updates on the performance of PNG’s prime resource projects, including the PNG LNG Project, the Ok Tedi mine, Lihir and Ramu Nickel, all world class resource projects. These projects must also contend with risks created by Covid-19, while coping with heightened society expectations of improved benefit flows to the National Government, and to local and regional communities.
The conference attendees will be provided with an overview of the global outlook for resources sector in these difficult times, with the ongoing impact of the Covid-19 pandemic and heightened concerns regarding global warming and climate change. These events will have significant repercussions on production and use of fossil fuels, while the movement towards renewable energy will impact the demand for various minerals.
Speaking of the COVID-19 pandemic I should acknowledge the extraordinary work that has been done by the industry, by the government of PNG and Australia and all stakeholders to ensure that the PNG resource projects kept functioning through the covid pandemic. As the mining and petroleum industry is responsible for nearly 90% of Papua New Guinea’s exports, it was critically important to the country that the industry remained operational. Maintaining the full participation of an international workforce, in light of international border closures, dynamic quarantine requirements, vaccination access challenges, and supply chain threats, to ensure that your projects remained productive during the pandemic was an extraordinary challenge that the industry met. It would not have been possible without the support of both governments, the PNG COVID-19 National Control Centre, Australian Border Force, the Queensland State Government, Australian Department of Foreign Affairs and Trade (DFAT), Air Niugini and the support of our loyal team members through the length and breadth of the industry in PNG. Thank you to all of you and well done!
All PNG’s key mining and petroleum companies have supported the COVID-19 public health efforts in PNG. Among our support and assistance, we have supported the government’s vaccine rollout plans, provided skilled personnel to support the government’s National COVID-19 Control Centre, provided support both financially and in kind to various provincial health authorities, local health facilities in our areas of operations, and also nationally. We are glad that our support was able to make a difference in the country’s response to the pandemic.
Changing Policy Climate
There has been heightened concerns among Chamber members about the changing PNG policy climate that has resulted in the shutdown of Porgera since April last year, the nation’s second largest gold producer. Subsequently, other major resource projects have been stalled over various policy considerations.
Changing government policies were discussed at webinars hosted by the Chamber over the past year. These webinars have complemented ongoing, resource sector activities that focus on areas such as community affairs and safety, where PNG projects have comparable performance to corporations in the developed world.
Despite the robust performances of the nation’s world-class projects, which are major contributors to government revenue and key employers in remote, regional locations, there has been significant concern about a sharp ongoing collapse in PNG’s exploration activity, with expenditure falling to the lowest levels in a decade.
This has been highlighted in recent times by the Government’s Mineral Resources Authority (MRA). The Chamber is keen to work with government to assess the causes of the downturn and to cooperatively design measures to make PNG attractive once again to investment flows and the Prime Minister’s keynote address today is of relevance.
The conference theme “Resource Industry – Making it Work for PNG”, comes at a challenging time. Export revenues from the sector fell by K6 billion last year, following sustained growth since exports from the PNG LNG Project commenced in 2014.
According to statistics released by the Bank of Papua New Guinea, petroleum and mining exports last year fell from K32.5 billion in 2019 to K25.8 billion because of a fall in LNG prices and shutdown of the Porgera mine.
Although petroleum and mining exploration activity has fallen sharply in recent years with no current sign of an upturn, I am hopeful the conference will spark renewed interest in the resources sector because of the sterling performance of PNG-based operations, which will be showcased at this conference.
The presentations by industry leaders on current petroleum and mining operations could provide confidence about future activities. Newcrest anticipates hitting a million ounce a year production in the next two years and steady increases in production is forecast at Ok Tedi.
Current projects such as the PNG LNG Project, Ok Tedi and Lihir continue to perform well despite difficulties created by the Covid-19 pandemic.
The confidence has been acknowledged in the 2022 National Budget. Mineral and petroleum taxes are forecast to increase by 41.8% to be a significant contributor to the 5.4% GDP growth that is anticipated. Clearly higher commodity prices are a key contributor to revenue growth of 11.4% annually in the medium term, and the PNG Treasurer is counting on a surge in revenue from the PNG LNG Project to provide the first budget surplus in over a decade in 2027.
At the current time TotalEnergies is about to commence its front-end engineering and design studies in the New Year and anticipates making a Final Investment Decision on its Papua LNG Project in 2023. For other major resource projects, further negotiations need to be concluded before they get the green light.
SANTOS / OSL
Related to that point – I am sure there will be considerable interest in tomorrow’s presentation by Kevin Gallagher, Managing Director and Chief Executive of Santos, who is in the process of implementing a merger with Oil Search. Combining the two companies will create a Top 20 oil & gas company internationally, and we look forward to Mr. Gallagher’s talk, “Creating a Regional Champion with a PNG focus”.
Santos is no stranger to PNG and have a long and storied history in the country over 40 years as an explorer and producer. I should know, as a young graduate geologist I spent several months as a well site geologist on their exploration wells in Western Province and West Sepik.
However, I must say that as a Papua New Guinean, I feel a touch of sadness and nostalgia knowing that Oil Search will be absorbed into Santos, given Oil Search’s 100 year history starting in PNG as a junior and growing to a fully-fledged oil and gas producer. But I know that the positive elements of the OSL DNA, those qualities are found in its incredible Oil Search people, that made it special and successful in a dynamic PNG environment, will combine with the strengths and organisational depth of Santos to produce a much stronger, adaptable and resilient regional giant that will not just be able to help PNG deliver on its potential in gas production, but, given Oil Search’s foray into biomass energy and Santos’s carbon sequestration projects in Moomba and the Timor Sea, will also play a crucial role in helping both Australia and PNG navigate this new global paradigm after COP26 – the path to net zero.
So, in closing, there is considerable uncertainty at present because of ongoing concerns regarding the PNG policy climate generally, and the potential impacts of Covid-19 and Climate Change.
However, over the next two days you will hear how projects are performing well despite those challenges in PNG and that combined with some assurance on the part of government of a more stable regulatory and fiscal regime, can hopefully lead to a renewal of investor interest in mining and petroleum activities.
Thank you for your attention.
PNG Chamber of Mines and Petroleum