Papua New Guinea’s Prime Minister, Peter O’Neill, told the PNG Mining and Petroleum Conference yesterday that there would be no new taxes for the resources sector. Meanwhile, presentations by the major industry players suggest the next 12 months will be critical in determining the future growth of the sector.

Prime Minister Peter O’Neill announced no new resources sector taxes.  Source: Business Advantage International

‘I believe we have emerged stronger,’ he said. ‘The global economy has turned the corner. We have maintained the faith and we can see light at the end of the tunnel.’

O’Neill claimed ‘it is time to invest in Papua New Guinea,’ pointing to the anticipated Total-run Papua LNG project, and the proposed Wafi Golpu and Frieda River mines.

‘This is not a time for us to make many changes but to maintain discipline.’

‘We cannot continue to over-rely on the mineral and petroleum sector to advance our goals.’

O’Neill said there is an upswing in the global economy and the commodity cycle, but he warned that the country cannot depend on it.

‘We cannot continue to over-rely on the mineral and petroleum sector to advance our goals,’ he said.

Cautious optimism

Business leaders presenting at the conference expressed cautious optimism about the prospects.

Andrew Barry, Managing Director of ExxonMobil PNG said the existing PNG LNG project is running above expectations. ‘We are on track to produce a total of 8.2 million tonnes of LNG this year, which is about 20 per cent beyond what we first thought the plant could achieve when the facilities were designed.

ExxonMobil PNG’s Andrew Barry  Source: Business Advantage International

‘The next 12 months is the most critical in all the years I have been here.’

He said drilling at the Muruk field led to a new discovery near the Hides field. A K1 billion kina investment will be made next year ‘to tie the Angore field into the production system at Hides,’ he said.

Philippe Blanchard, Managing Director of Total E&P PNG said the company is well advanced in its engineering studies, field surveys and appraisals program for Papua LNG. He said the company has also begun to assess commercial viability, looking at the project structure, financing and the LNG market.

‘The environment is changing a lot,’ he said, adding that the company will need to see how to take advantage to get the best project.

Blanchard said integrating with established infrastructure is a complex task. ‘Our gas is very different from the gas in PNG LNG. We need to find the right elements between what is existing and what we want to build.’

Critical time

Peter Botten, Managing Director of Oil Search, observed that the ‘next 12 months is the most critical in all the years I have been here.’

‘The LNG market has never been more dynamic. We are also seeing some of the best exploration opportunities I have seen in PNG.

‘PNG LNG is a stellar world class project but there are legacy issues.’

Botten said the number of LNG-importing countries is expected to rise by 100 by 2020. He said there is strong demand in Asia, with demand in the first quarter of this year up by 37 per cent in China on the previous corresponding period, by 14 per cent in South Korea, by 12 per cent in Taiwan and by 9 per cent in Japan.

He said LNG is increasingly preferred to nuclear and coal.

Botten noted that there is a five-to-seven year investment horizon for new projects, and current planned activities are only likely to produce ‘about half of what is needed’.

‘The window is opening for new demand.’

New Mining Act

Botten added that about 30-35 per cent of LNG is now traded in the spot market, with large companies like ExxonMobil and Total building their own positions. He said it ‘changes the financing’ and the types of alliances that are formed.

Johnson Tuke, Minister for Mining, told the conference that a revised Mining Act is ‘now before the National Executive Council.’

Tuke said the mining sector has made ‘an impressive turnaround.’ The Wafi Golpu and Frieda River proposals remain a priority for the government, he said.