Marape to reassure Papua New Guinea’s mining and oil industry
Papua New Guinea Prime Minister James Marape has confirmed that plans for changes to the country’s regulatory and tax regimes for PNG’s mining and petroleum sector will be released shortly. But he also reassured the industry that the changes, signaled for implementation in 2025, would be made “in consultation”.
Marape said at an industry meeting last week that new bills would be released in “June or July”. Following recent disruptive measures to increase local participation in the Porgera gold mine and government-induced delays in gas projects, he also reassured the industry that his government remains in favor of foreign investment. in the area.
“My plea has sometimes been misinterpreted. We are not trying to scare our foreign investors. We work with them to maximize the income of our country: taxes, rents, rates or the many businesses that result from our projects, ”he said.
He also reassured the miners that all ongoing mining projects would be protected against future changes in the country’s mining laws.
“If anyone in the mining or petroleum space is interested in adding value, you would have the government’s greatest attention”
“Any ongoing mining development contract will run its full course because they were executed within the framework of [legislative] regime, ”he said.
“We are a robust country, a democratic country and a country that respects the rule of law.
“We will honor the agreements we have signed with our investors and give ample signal to our investors of any changes.”
Marape also said he would like to see more investment in downstream processing of the sector.
“If someone in the mining or oil industry is interested in adding value, you will have to pay the utmost attention to the government,” he said.
The government has considered the possibility of including production sharing agreements (PSAs) in its new resource laws, which the industry is generally opposed to.
Typically, under a PSA, the state retains ownership of its mineral resources but hires a developer to manage a resource project in exchange for a share of the production. This would represent a major change from the current PNG regime, where a developer controls resources in return for paying various taxes and rents and giving the state a mandatory minority share in any project.
Speaking on behalf of the PNG Chamber of Mines and Petroleum, Santos PNG Managing Director John Chambers warned that PSA-type regimes have been detrimental to other countries like Bangladesh, Indonesia and Brazil. He also warned that any changes to PNG’s current mining and petroleum regimes would “impact short-term investments, unless you can define how this new regime will be and articulate it properly.” .
To support its argument, the meeting heard from two organizations on the downsides of public service announcements. Wood Mackenzie Vice President – Energy Consulting, Asia-Pacific, Chris Graham, said successful PSAs placed a greater administrative burden on government, while Emma Beatty of MineHutte noted that “99 percent of countries with active mining industries “had and that PSAs made projects more difficult for miners to finance because lenders did not understand them. Due to their greater complexity, they could also exclude junior junior mining companies.
Faced with the arguments, the prime minister appeared to soften his stance on public service announcements at the meeting, without committing his government to adopting the House’s recommendations.
He admitted that public service announcements might “not be the way to go” and suggested that a “hybrid” system might work better. He reminded the assembly that there had not yet been a regime change but that “the intention was there” and he welcomed the “healthy debate and consultation”.
‘But whatever its shape [reform] takes, 2025 is the reference date, ”he said.
There is much at stake in changing PNG’s regulatory regimes for both mining and petroleum.
As provisional figures of PNG Extractive Industries Transparency Initiative 2019 The report says PNG is one of the most resource-dependent economies in the world, with mining and oil accounting for 88% of its exports and 28% of its GDP.
At the same time, according to Chris Graham of Wood Mackenzie, there is currently significant underinvestment in the industry and it is much more difficult for projects to attract investment globally. The world has changed since the PNG LNG project went live in 2014, he observed. With high upfront project costs and long payback periods, resource developers were only going to look for top-notch opportunities.
This puts a lot of pressure on the Marape government to get the regulatory changes.