Papua LNG, forex and law and order. Business Advantage PNG looks to the year ahead and considers what Papua New Guinea-focused businesses can expect in the coming 12 months.

A peaceful Port Moresby Harbour.  Credit: BAI

According to the National Budget, delivered last December, Papua New Guinea’s economy is expected to grow by 5.0 per cent in 2024, with non-resources growth at 4.7 per cent. These projections align with the assessment of the  International Monetary Fund, with which PNG has an ongoing support program.

Inflation is expected to run at 5 per cent this year, up from 3.5 per cent in 2023.

Social and political stability

Business tends to prosper in stable and predictable environments and the sad events of last week, predominantly in Port Moresby, represented the worst possible start to the new year for many PNG businesses.

Business Advantage PNG runs an annual business confidence survey in PNG, the PNG 100 CEO Survey. While the results of the 2024 survey won’t be published until March, responses so far indicate businesses have been concerned about worsening security and law and order issues for some time.

The National Government’s announcement in its 2024 budget of a 9.5 per cent increase in funding for the law and justice sector, including for an additional 500 police per year, was welcomed at the time, as was the bilateral security agreement signed last month with Australia which will support it. Last week’s events show just how critical these measures will be.

With a parliamentary Vote of No Confidence becoming permissible next month, some business leaders also expressed concern about the impact of a prolonged period of political uncertainty in PNG. While such votes are a feature of PNG’s robust democracy, business will be hoping they do not distract from the task of rebuilding businesses affected by last week’s events, nor ongoing law and order reform, not to mention the regular business of government.

Petroleum and gas

With early works under way, a final investment decision (FID) on the US$10 billion Total Energies-led Papua LNG project is still expected to come this year, although the timing has slipped due to a number of different factors. It may not now happen until the middle or even the second half of this year.

But, when FID does come, it will fire the starting pistol on a decade or more of development in the PNG’s petroleum and gas sector, with ExxonMobil’s P’nyang project set to follow once Papua LNG’s four-year construction phase is complete.

Mining activity

The reopening of the Porgera gold mine, closed since April 2020, has taken much longer than hoped but, just before Christmas, the new owner of the mine, New Porgera Limited, announced its reopening. Operator Barrick Niugini has confirmed work has now started on recommissioning the mine, alongside negotiations for a new Community Development Agreement, paving the way for mining and processing to restart in this quarter.

‘We are proud that the mine is reopening, as normalcy will return,’ Nickson Pakea, President of the Porgera Chamber of Commerce and Industry tells Business Advantage PNG. ‘It’s welcoming news and I am thankful to the PM and the State Negotiating Team, and Barrick and New Porgera Ltd for making it happen.’

It is expected to take until Q3 for production to return to pre-closure levels, however.

The arrival of the world’s largest gold miner, Newmont Corporation, in PNG as a result of its acquisition of Newcrest Mining was one of the big stories of 2023. This year, we’ll be looking for signs that the US$5.8 billion Wafi-Golpu project Newmont now co-owns with Harmony Gold will finally progress.

“Investment in-flows for the resources projects, when they eventually occur, are likely to improve forex availability and bolster the kina”

Late last year,  the Mineral Resources Authority’s Managing Director Jerry Garry told industry leaders that a mining development contract for Wafi-Golpu could be signed as early as this quarter, which would allow for the granting of a Special Mining Lease in the first half of 2024. After years of delays, this would be a major development for business in Morobe Province.

There are also signs of increased interest in Chinese-owned PanAust’s US$6 billion Frieda River gold and infrastructure project, with Jerry Garry suggesting negotiations over its mining development contract may commence before the end of this year.

Forex

Foreign exchange availability was the major impost on business during 2023, in spite of steps taken by PNG’s central bank to increase supply. These steps coincided with a gradual depreciation of just under 6 per cent in the value of the kina against the US dollar in the second half of 2023.

So, what are the prospects for this year?

Governor of the Bank of PNG, Elizabeth Genia. Credit: BAI

The Bank of PNG’s newly-confirmed Governor Elizabeth Genia has already flagged that the size of its interventions this year are unlikely to match those of 2023 and that we should expect a further fall in the value of kina in the first part of this year.

Investment in-flows for the resources projects, when they eventually occur, are likely to improve forex availability and bolster the kina. In the meantime, ‘the bank will continue to support the market,’ Genia told the PNG Mining and Petroleum Investment Conference late last year.

One measure of how effectively the central bank manages this process will be over fuel supply. For some time, PNG’s largest fuel importer and biggest user of forex, Puma Energy, has struggled to obtain the forex it needs to keep PNG’s vehicles on the road and planes in the sky.

The looming 8 March deadline for the closure of Puma Energy’s bank accounts with its banker, BSP, adds a further level of complexity to the situation.

Infrastructure

The government has also committed to significantly greater funding for both its electricity and water utilities in 2024, two areas of pressing need. Improved reliability across the two main power grids, Port Moresby and Ramu, is the goal, as well as investment in future generation, especially hydro and solar. The independent power producers who supply PNG Power’s grids will be hoping too for more settlement of outstanding arrears.

Meanwhile, the opening of the new Lae Tomodachi International Airport has provided a fillip for business in PNG’s second city and increased the likelihood of regular direct international flights into Morobe Province. As of this month, Port Moresby also now had regular services to Guangzhou in China though China Southern Airlines.

Sundry items

This year, we should also expect to see more details on the expected new Income Tax Act, as well as the government’s arrangements for its flagged Special Economic Zones.

Finally, after some delays, Port Moresby’s premium accommodation market will be boosted by the opening of two notable new properties in the first quarter of this year: the Marriott Apartments at Steamships’ new Harbourside South development, as well as the Hilton Residences in Waigani, which are phase two of the three-stage Star Mountain Plaza development.