The survey received 28 responses, with a strong weighting towards readers in management roles and above, including a solid 12 responses from those labelling themselves as "Board / C-suite / Owner". In terms of sectors, 50% of respondents came from a mining background, with the remainder split across a range of areas, including multiple participants from the energy, infrastructure and transport sectors.
Overall, results were quite positive, with only a couple of negative responses, suggesting 2022 will be a year of recovery for the resources sector in PNG.
For our first question on foreign exchange, we asked about the constant headaches that PNG business face concerning access to forex, and whether, despite regular assurances by the government of this being addressed, the problem would improve in 2022, and whether in the first or second half of the year.
Unfortunately, this was one of the negative results, with a clear cut 46.4% of respondents indicating that there would be no improvement anytime soon. Among the remaining options, there was an equal split of 14.3% each for those expecting some improvement in the first half of 2022, those expecting it in the second half, those expecting improvement but not until 2023, and just under 11% marking unsure.
A number of comments were included, and we provide a couple of those below:
- "The resource sector is a major source of foreign currency for PNG, and this could help the shortage but with the covid impacts and the delayed approval of some of the major projects, and the ongoing legal and NGO campaigns against these projects, there is grave doubts on how fast approvals will be finalized. This in itself is discouraging for foreign investment. The tax on levies too - discouraging to foreign investment. There seems to be continuous delays with no end in sight. Project owners lose money waiting in limbo."
- "With PNG having to service more and more loans in hard currency and restrictions on currency transactions the foreign exchange situation will get worse
Next, we looked at energy supply and how unreliable power is a constant source of concern for businesses in PNG, with the state utility, PNG Power, constantly hamstrung by various issues with payments and funding. We asked participants if there were any signs of improvement for 2022 and received a more even spread of responses than the previous question, split between those expecting slight improvement (32.1%), those expecting no change (25%), and those expecting a slight deterioration (28.6%).
Also on energy, we asked about the prospects for upstream energy projects in PNG in 2022, particularly in light of Prime Minister James Marape's change of opinion on the proposed takeover of Oil Search by Santos, and his comments that the deal "is a positive development in terms of PNG investment destination aspirations".
An impressive 57.1% of respondents indicated they have a positive outlook, and another 32.1% marked ‘neutral', leaving just 10.7% with a negative response.
We then moved to mining and, citing the August 2021 comment from Canadian junior miner Freeport that "Papua New Guinea remains a premier mining destination globally" asked about the outlook for the sector in PNG for 2022. Given half the respondents were from the mining sector, the results for this question are perhaps the strongest set of data for the survey, and an overwhelmingly positive sentiment emerged. Almost 47% of respondents selected either ‘very positive' (7.1%) or ‘positive' (39.3%), and another 25% selected neutral, leaving only 28.6% on the negative side.
There were also two noteworthy comments for this question, although both were negative, going against the overall sentiment:
- "The PNG mining sector is going nowhere until such time as the next national election is resolved. Investors need to know who with whom they are dealing"
- "The ad hoc government regulatory changes are a disincentive to invest in major projects. Taxes and other costs are making it uncompetitive"
Finally, we asked for a more general perspective on the state of the market - "All things considered, will the PNG resources sector have a good year in 2022?" - and, encouragingly, this question received the most positive response of the survey.
More than six in ten respondents (60.7%) returned a positive response, with 14.3% selecting ‘yes, a very strong year looks likely' and 46.4% choosing ‘yes, but nothing spectacular'. Of the remainder, 25% indicated that they are not sure, while the two negative options - ‘no, looks unlikely' and ‘no, there are definitely bad signs for the sector as a whole' receiving 7.1% each.
We also invited final remarks and, as further confirmation of the integrity of the survey group, ten respondents opted to include additional comments. We include all comments below, concluding this overview of the PNG Report Resource Sector Sentiment Survey for 2021-2022.
- Mining has contributed to Health as part of their social responsibility in PNG and will continue to do so.
- Government needs to stand firm, it must stick with ‘take back PNG' now.
- Marape government is a very, very powerful government.
- Future depends on a stable political situation.
- The PNG government needs to realise that a typical third world approach to project governance and economics should not be continued with, that is "get the money and get it now" with no regard to the future and the negative impact on foreign resources investment sentiment is no way to continue.
- Porgera gold mine is the first project that needs attention by government. This project is of national importance in that, unless the government can display a stable investment framework then they will potentially sink all other interest in any other major project in PNG.
- The present PNG administration has destroyed the reputation of PNG as a safe place for high risk mineral exploration investment. Investment funds will continue to be directed to other destinations.
- It would be preferred to leave all major project negotiations and approval processes to the appropriate Government Departments, that is where all the technical people are and follow the current procedures like before. Amending the legal procedures, and regulations to always fix problems is not the only way to progress negotiations. All key aspects of new projects or any project requires equal contribution from experts in the departments and their departmental heads.
- Until the government can make up its mind as to whether it wants to be a government that will be progressive or be driven by slogans and nationalism, it is unlikely that any new resource projects will get into the Pipeline. The disaster of Porgera will weigh heavily on PNG's reputation for a long time.
- Sovereign risk and costs are increasing so its attractiveness is declining.