In spite of the recent worldwide slump in commodity prices, numbers were strong at this week’s 13th Papua New Guinea Mining and Petroleum Investment Conference in Sydney. Business Advantage PNG examines why.

For three days, majors and ‘juniors’ , their financiers, government officials, landowners, politicians and service providers from 16 countries mingled, made presentations, discussed projects and shared their experiences of doing business in what ExxonMobil PNG’s outgoing Managing Director Peter Graham, described as ‘a high cost, high risk, technically challenging environment’.

1. PNG has what the world wants

The PNG Chamber Mines and Petroleum’s Gerea Aopi

If prices are weak (gold is at four-year lows, for instance) and PNG is so challenging, why the strong interest?

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 this year 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 South-East 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.

Deloitte Access Economics’ Chris 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 consultants, contractors and vehicles during what newly-appointed Chief Operating Officer Musje Werror described as ‘tough times for us’.

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

Early next year, two of the PNG resources industry’s most senior executives, Nigel Parker of Ok Tedi Mining and Peter Graham of ExxonMobil PNG, will be moving 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. Meanwhile, 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, currently awaiting the results of arbitration over the planned Elk-Antelope gas project it hopes to pursue with InterOil, was keen to sell its vision for the project.

For all the talk of cost-trimming, it appears Total isn’t quite ready to talk synergy with ExxonMobil, should their plans go ahead. The Elk-Antelope gas project was ‘only feasible with Total in the driving seat’, said Guillermou, bluntly.

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 and the pre-feasbility study for the Harmony Gold/Newcrest Mining Wafi-Golpu project—PNG’s first major underground mining operation—on track for completion by the end of this month.

4. Stability is the key

Prime Minister Peter O’Neill

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.

Grant Christie, Vice President and General Manager for Talisman Energy’s PNG and Australian operation’s praised PNG’s ‘clear and attractive fiscal framework’, while Oil Search’s Gera Aopi warned that the mining sector was ‘facing one of the worst years in recent times’, with many exploration tenements ‘in the process of being abandoned’.

The message from industry was clear: this is no time for radical change.

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.

Peter O’Neill told delegates that his government wanted as much value-adding as much as possible for PNG’s resource exports, to help with job creation, while ‘we also want domestic gas development to deliver affordable energy to our people’.

He also challenged resources companies to support local small and medium business by making sure they were able to supply resources projects in a substantial way.