World Bank’s Ilyas Sarsenov. Credit: BAI

‘We estimate that the PNG economy will be nine per cent smaller in 2023 compared to our pre-pandemic forecasts. This shock was substantial for this economy.’

—Ilyas Sarsenov (PNG Country Economist, World Bank), talking during a special Business Advantage PNG business briefing last week

Given the delicate state of Papua New Guinea’s economy, as indicated by recent World Bank and Asian Development Bank forecasts, the news last month that the final legislative hurdle for the Papua LNG project had been delivered is welcome.

While this step does not guarantee the US$10 billion project will go ahead, it has been welcomed as a key measure for ‘de-risking’ the project. It is also a necessary precursor to the front end engineering and design (FEED) stage of the project, anticipated to commence next year. Once we’re in FEED, the odds start to look very good.

As Kumul Petroleum’s MD Wapu Sonk told us last month, the prospects for the global LNG market are now improving after a tough 12 months. PNG is now looking to target a gap in the market in the late 2020s.

That gap may embolden the two other LNG projects currently in development, ExxonMobil’s P’nyang and Twinza Oil’s Pasca A, and focus government attention on negotiating both projects later this year.

Reforms

Developers have another incentive to move quickly: PNG’s resources laws are set to change, with Sonk expecting legislation before Parliament as early as the April sitting. These new changes are expected to lock in far greater powers for the state-owned resources companies, Kumul Petroleum and Kumul Minerals.

The Investment Promotion Authority’s MD Clarence Hoot also expects revised foreign investment regulations before Parliament soon and a revised list of restricted business activities. Our interview with him will be published next week.

Provinces

As well as hosting Papua LNG, Gulf Province is also the host province for Mayur Resources’ proposed Orokolo mineral sands project. Having secured a mining licence for its cement and limestone project in Central Province last August, Mayur’s MD Paul Mulder is keen to keep up momentum, as he told us last week.

With the Ihu Special Economic Zone starting to get some momentum, Gulf looks set for some significant new development in the coming decade.

Less certain, but equally deserving, is Western Province, the focus of some recent discussion about mooted Chinese investment there. As our David James outlines, Western faces a race against the clock to replace the income from the Ok Tedi mine.

Speaking of mining: with PNG falling in the Fraser Institute’s annual mining investment survey, getting Wafi-Golpu licenced by the end of 2021 and reopening Porgera would seem necessary steps to restoring investor confidence.

Not just resources

PNG doesn’t run on resources alone, of course. Indeed, retail and agriculture have been two of the better-performing sectors in the past year.

In a special Youtube ‘Inside View’ interview last week, the CEO of Brian Bell Group, Cameron Mackellar, told me the retailer had a record 2020 and is expecting ‘near double digit’ growth in 2021. (Interestingly, the group will be spending a lot of its CAPEX in the Highlands this year.)

There are also major changes afoot in PNG’s financial services sector, with several players considering banking licences, in addition Kina Bank’s plans for Westpac. All players seem to agree this is a sector that badly needs more competition.

Eight up

We passed a milestone of our own last month, when businessadvantagepng.com turned eight years old.

Since 2013, we have welcomed 1.13 million readers to the site. 330,000 of those have visited in the past 12 months alone – 113,000 more readers than the previous 12 months.

We’re looking forward to an even busier 2021. The 16th annual edition of our Business Advantage Papua New Guinea investment guide is just round the corner and you can expect further announcements.

I hope your year is equally productive.