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.
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.