The 12th Papua New Guinea Mining and Petroleum Investment Conference was held last week in Sydney, Australia. The event was hosted by the PNG Chamber of Mines and Petroleum.

PNG’s Prime Minister Peter O’Neill (right) with Dr Ila Temu, President, PNG Chamber of Mines and Petroleum

1. Resources have never been bigger in PNG

As PNG’s new Mining Minister Byron Chan observed, mining was responsible for 71% of PNG’s export receipts in 2011. The 1350 delegates attending this year’s conference was a record for the event, while the packed program and overflowing expo area confirmed that interest in this sector has never been higher.

Indeed, Dr Ila Temu, President of the PNG Chamber of Mines and Petroleum, highlighted the large number of new entrants into the PNG market, including Mitsubishi, Kina Petroleum, Total, Rio Tinto, Vale, St Barbara and Indochine Mining.

2. Review of mining and petroleum laws

Prime Minister O’Neill announced a ‘wide-ranging’ review of the resources tax regime. While promising ‘no immediate changes’ and ‘no drastic or radical changes to existing laws’, he did signal his government wanted to achieve ‘fair and equitable distribution of benefits to all stakeholders’. Petroleum Minister William Duma also announced plans for a Petroleum and Gas Authority.

Mining Minister Chan used the conference to announce a World Bank-assisted review of PNG’s mining legislation. The twin goals of the review, he said, were to ensure the sector’s ‘global competitiveness’ while also ensuring ‘improved wellbeing’ for PNG’s people.

While final proposals are not expected until the end of 2013, measures canvassed in the Minister’s speech included:

• Limiting the number of Exploration Licenses a company can hold, extending a Licence’s lifespan but reducing the acreage it covers
• Extending the life of a Mining Lease
• Requiring mine closure plans up front and mine closure funds to be established
• Social and environmental impact work to be conducted at exploration stage
• Review of the Mineral Resources Authority to ‘make it more effective’
• Measures to encourage in-country downstream processing.

3. No-one likes cost blow-outs

While affirming that ‘there has never been a better time to invest and participate in PNG’s resources sector’, Prime Minister O’Neill used his opening address to the conference to draw attention to cost blow-outs on resources projects, most particularly the US$3.3 billion blow-out associated with the PNG LNG Project, which his Government must help fund.

‘We have already dropped the ball when it comes to productivity,’ he said. ‘We have been far too complacent about cost blowouts. We have to get serious about the cost of doing business in PNG.’ He flagged the creation of a Productivity Commission to advise his Government on relevant measures.

4. PNG LNG is just the start

According to Jeff Appleton, ExxonMobil’s Senior Vice President—LNG Marketing, there will be a 60% increase in the global demand for natural gas between 2010 and 2040, due to world population growth and natural gas’ lower carbon emissions compared to coal.

With its supply agreements already in place, ExxonMobil is still aiming for first gas exports in 2014, while exploring for more gas in PNG’s Western Province and keeping its options open on a third train. Meanwhile, InterOil is considering who to take on as a major partner in its smaller Liquid Niugini Gas project, which recently received National Executive Council approval.

5. Emerging markets are where it’s at

With US debt and equity investors pumping a lot more of their money into emerging markets in pursuit of higher returns, Papua New Guinea is well-positioned, argued Anthony Miller, Managing Director of Goldman Sachs & Partners Australia.

A history of successful mineral investments, combined with a stable fiscal regime, strong economic growth and the Government’s willingness to partner with commercial enterprises made investing in high quality resource projects in PNG an ‘attractive proposition’, he told delegates.