Five things to take home from the 2014 PNG Min­ing and Petroleum In­vest­ment Con­fer­ence

De­spite the world­wide slump in com­mod­ity prices, num­bers were strong at the 13th Pa­pua New Guinea Min­ing and Petroleum In­vest­ment Con­fer­ence in De­cem­ber 2014.

Business Advantage Papua New Guinea - - Mining & Petroleum -

1. PNG has what the world wants

Pres­i­dent of the PNG Cham­ber of Mines and Petroleum, Oil Search’s Gerea Aopi, em­pha­sised that the com­mence­ment of liq­ue­fied nat­u­ral gas ex­ports in May 2014 had ‘cre­ated new con­fi­dence in PNG’S re­source’s sec­tor’.

The long-term out­look for PNG is still very pos­i­tive too, ac­cord­ing to Deloitte Ac­cess Eco­nomics Part­ner, Chris Richard­son, who pointed out that the ur­ban­i­sa­tion in SouthEast Asia, es­pe­cially in China and In­dia, still had a long way to run and ‘PNG has what the world wants’: not only min­er­als but also agri­cul­tural ca­pac­ity.

2. The next decade will be about ‘be­ing bor­ing’

With the sup­ply side of re­sources fi­nally start­ing to catch up with de­mand, af­ter a decade of catch-up, it was no sur­prise that prices were com­ing down, said Richard­son.

He urged the in­dus­try to not just fo­cus on rev­enue, but also on costs.

‘May I rec­om­mend to you be­ing bor­ing?’ he said to del­e­gates.

PNG’S min­ers are al­ready tak­ing up this rec­om­men­da­tion, with Newcrest Min­ing re­mov­ing costs across all ar­eas of its gold mine on Li­hir Is­land, and Ok Tedi Min­ing repa­tri­at­ing ex­pat work­ers, and cut­ting back on em­ploy­ment of con­sul­tants, con­trac­tors and ve­hi­cles.

Ex­plo­ration pro­grams by ‘ju­niors’ have also been rad­i­cally cut back too, as cap­i­tal is con­served in or­der to weather the low point of the price cy­cle.

3. The guard is chang­ing

Two of the PNG re­sources in­dus­try’s most se­nior ex­ec­u­tives, Nigel Parker of Ok Tedi Min­ing and Peter Gra­ham of Exxonmo­bil PNG, have moved on.

In both cases, their re­place­ments will have very dif­fer­ent projects to man­age: Ok Tedi COO Wer­ror will be faced with the chal­lenge of ex­tend­ing the life of what has been for many years PNG’S largest mine, with sig­nif­i­cantly less re­source (see page 33). Mean­while, new MD An­drew Barry will be in­her­it­ing a fully func­tion­ing PNG LNG project and must ad­dress the chal­lenge of how and when to ex­pand pro­duc­tion into the fu­ture.

There were newer kids on the block too: this year, To­tal Oil’s Jean-marie Guiller­mou, Se­nior Vice Pres­i­dent for Asia-pa­cific, was given a prom­i­nent place in the pro­gram on the open­ing morn­ing. The French ma­jor was keen to sell its vi­sion for the Elk-an­te­lope gas project it hopes to pur­sue with In­teroil (see page 27).

Mean­while, PNG’S next ma­jor min­ing project may well be un­der the sea or un­der­ground, with Nau­tilus Min­er­als’ Sol­wara 1 project fi­nally back on track (see page 35) and the pre-fea­si­bil­ity study for the Har­mony Gold/newcrest Min­ing Wafi-golpu project—png’s first ma­jor un­der­ground min­ing op­er­a­tion—is now com­plete (see page 34).

4. Sta­bil­ity is the key

In his speech to the con­fer­ence, PNG’S Prime Min­is­ter Peter O’neill em­pha­sised the im­por­tance of po­lit­i­cal and pol­icy sta­bil­ity for the re­sources sec­tor and ex­pressed an un­der­stand­ing of the im­por­tance of en­cour­ag­ing for­eign in­vest­ment in the sec­tor:

‘We can and we must build on our suc­cess and we can’t do it with­out qual­ity for­eign in­vest­ment and skills.’

With the fis­cal frame­works for the in­dus­try un­der re­view, such a state­ment was wel­comed.

5. PNG needs to see more for its re­source ex­ports

Many of the pre­sen­ta­tions at the con­fer­ence em­pha­sised the benefits de­liv­ered by re­sources projects to landown­ers and com­mu­ni­ties.

For in­stance, Newcrest Min­ing’s David Woodall told del­e­gates that about 60% of the US$565 mil­lion 2014 rev­enue from the Li­hir gold mine was spent in PNG, while Bar­rick Gold’s Chris Trainor spoke ex­ten­sively about the Min­ing and Petroleum In­dus­try In­vest­ment Fund, which the Porg­era miner has es­tab­lished as an in­vest­ment ve­hi­cle for landowner roy­al­ties.

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