The Prime Minister, Peter O’Neill, has told the Papua New Guinea Mining and Petroleum Investment Conference in Sydney that there will be no decision on a revised Mining Act until after the 2017 national elections. He also indicated that the Government will pursue bi-lateral trade deals.

Prime Minister Peter O’Neill addresses the PNG Mining and Petroleum Investment Conference this week.

O’Neill told the conference that the decisions on the long-awaited revision of the 1992 Mining Act involve taking into account the interests of many stakeholders.

‘Our aim is to achieve a fair deal for our people, both that landowners are not adversely impacted but also for the country as a whole, which has been the driving force behind the proposed changes.

‘If this is not done properly, it has the potential to create uncertainty for investors. So the timing of these changes is very important.

‘Any changes to the Act we will make sure benefits the landowners, and the provincial governments and of course the governments will be fairly compensated as a result of the development of these projects.’

Trade deals

O’Neill indicated that PNG’s rejection of the PACER Plus regional trade agreement was indicative of the government’s shift of emphasis.

‘We believe our country is better off pursuing bi-lateral trade agreements with countries like Australia and New Zealand and others in the region. It is important that we pursue one-to-one trade agreements. We will implement those agreements so we can modernise our economy.

‘There is no doubt that 2017 will be  challenging year for the global economy as well.’

‘Our focus will include doing business with countries which are significant for our markets, especially for our resources, agriculture and mining products.’

O’Neill added that the ‘economy continues to remain a challenge’.

‘There is no doubt that 2017 will be a challenging year for the global economy as well. Our government revenues from the oil and gas sector have fallen almost K2 billion.’

Conservative

Treasurer Patrick Pruaitch

The Treasurer Patrick Pruaitch told the conference that oil prices are likely to remain low, suggesting a range of about US$60 a barrel at the end of this year and into early 2017.

‘What is clear is that the volatility is not likely to go away any time soon. The World Bank and others have been anticipating that low oil prices would boost economic growth. This has not happened.

‘Last October, the International Monetary Fund for its economic outlook revised downwards to 3.1 per cent its forecast for this year’s global economic growth.’

Pruaitch acknowledged that, had the fall in oil prices been anticipated, government policy would have been very different.

‘The Saudis maintained high production levels to maintain market share leading to oversupply and the fall in price.’

‘We are all much wiser in hindsight. If the crystal ball gazers had predicted the slump in oil prices, the government would have taken a more conservative stance.’

Peak oil

Pruaitch said the belief was that oil prices would remain high because of concerns about peak oil. However, the introduction of new technology in the US increased shale oil production, ‘turning the US from one of the largest importers of crude oil to a position as the world’s second largest producer after Saudi Arabia.’

In response, he said, the Saudis maintained high production levels to maintain market share, leading to oversupply and the fall in price. Pruaitch said analysts are skeptical that recent agreements in OPEC to limit supply will eventuate.

‘In the 2017 budget there is ‘earmarked expenditure’ of K13.35 billion, and anticipated revenue of K11.5 billion.’

Pruaitch said the government will adopt a conservative fiscal stance. ‘PNG’s finances remain in sound shape even though government spending could remain tight for the remainder of this decade.

‘This government plans on ending this expansionary fiscal policy by 2020, with a target to attain a balanced budget in the following year by keeping a tight rein on the budget.’

Pruaitch said public debt will stay below the 30 per cent of GDP. In the 2017 budget there is ‘earmarked expenditure’ of K13.35 billion, and anticipated revenue of K11.5 billion.

‘There is a huge amount of oil and gas out there that we could use if we still wish.’

‘This leaves a deficit of K1.8 billion which will be debt-financed. The government may have to remain in that mode as long as revenues are stagnant.’

He added that PNG’s economy has become more diversified, noting that agricultural exports are higher than exports of copper and crude oil.

Energy demand

Professor Peter McCabe, Head of School at the Australian School of Petroleum at the University of Adelaide, told the conference that world energy demand will double by 2050.

He said that, although energy consumption peaked 10 years ago in the developed world, demand will rise sharply in the developing world.

McCabe warned against assuming this would mean higher oil and gas prices, however. He said a large part of the new energy would come from renewable sources and there is also potential for more supply.

‘There is a huge amount of oil and gas out there that we could use if we still wish.’