K103.2B at risk over resource projects

AS THE new year begins resources firms will be reflecting on what, if any, action the Papua New Guinean government take to assist in advancing shovel-ready projects.
K103.2B at risk over resource projects K103.2B at risk over resource projects K103.2B at risk over resource projects K103.2B at risk over resource projects K103.2B at risk over resource projects

Porgera workers show their retrenchment notices after the Marape government refused to renew Barrick Niugini's SML

Staff Reporter

Chamber of Mines and Petroleum's Anthony Smare recently noted that if these mining and energy projects were green lighted, it would mean about $30 billion, or K103.2 billion, of cash into the country.
 
Speaking at the recent 16th PNG Mining and Petroleum Investment Conference in Sydney Smare said he expected at least four major resource projects to get the go-ahead.
 
"It is the first time that PNG can deliver not just one but four major resource projects to the tune of over $30 billion in capital investment within a very short window. You have the Papua LNG with $12 billion (about K42.25 billion) capital cost, P'nyang with US$10 billion (about K35.2 billion), reopening of Porgera, Wafi-Golpu copper gold project, which could be around $6 billion (about K21.1 billion) or potentially higher.
 
"If you add the Pasca A gas project of $2 billion (about K7 billion), this represents more than $30 billion. And that is the impact you can consider on the GDP at the moment which is around $27 billion (about K95 billion)," Smare said.
 
The National newspaper reported a summary of the resource projects and their development updates of the year.
 
Energy
 
PNG LNG: The PNG LNG (liquefied natural gas) project has paid over K14 billion to the State since the start of production, according to ExxonMobil PNG Ltd. In 2021 alone, the State earned record revenues from the project, with over K2.2 billion delivered to the Government. Revenues delivered by the PNG LNG project include K7.1 billion flowing to Kumul Petroleum Holdings Limited (KPHL) and an estimated K4.5 billion in various taxes paid to the Internal Revenue Commission (IRC).
 
"The revenues and associated benefits from the PNG LNG project provide the PNG Government the opportunity to promote sustainable, long term economic development. We are extremely proud of our performance in contributing to the PNG economy," ExxonMobil PNG managing director Peter Larden said.
 
"Since 2014 we have delivered over K14 billion to the country, including some K4.5 billion in taxes. This includes the April payment of K1.1 billion in estimated tax for the first four months of 2022 linked to increased global oil prices and sustained volumes. This is one of the largest single tax payments by the PNG LNG project to date. We are pleased to see this increased revenue going to the State."
 
ExxonMobil PNG: (33.2%), runs the PNG LNG project on behalf of joint venture partners Santos Limited (42.5%), KPHL (16.8%), JX Nippon Oil and Gas Exploration Corporation (4.7%), Mineral Resources Development Company (2.8%). Petromin, with a 0.2% stake, was incorporated into Kumul in 2016.
 
Papua LNG: In February, TotalEnergies reassured communities in Gulf that the $10 billion (about K35.2 billion) Papua LNG project was back on track. The front-end engineering design was set for June and final investment decision in 2024.
 
New senior vice-president TotalEnergies Asia-Pacific, Julien Pouget, visited Poroi Two village and met locals, saying the project was back on track and the people of Gulf would now see increased activity.
 
Pouget spent two days in the province seeing firsthand the terrain and landscape of petroleum retention licence (PRL 15), the Elk Antelope fields and met staff at the Herd base.
 
In July, Total said its Papua LNG joint venture had decided to launch the first phase of front-end engineering design studies for the Papua LNG project's upstream production facilities.
 
Studies for the downstream liquefaction facilities were also progressing in line with the overall project schedule, with an objective of launching the integrated Feed in the fourth quarter of 2022.
 
The project is targeting an invetment decision around the end of 2023, and a start-up at the end of 2027.
 
P'nyang: Prime Minister James Marape said in Parliament in December that the State negotiating team was working towards a gas agreement for the P'nyang project in Western Province.
 
He said the heads of agreement had been secured and were moving into the next level of agreements to ensure the project was in order.
 
The agreement incorporates fiscal, regulatory and licensing terms that were negotiated and gives the State, at cost, an additional 10% of the project.
 
But, it is not over yet: "In the next phase, we will be engaging with the Western government," Marape said
 
Pasca A: In July, Petroleum and Energy Minister Kerenga Kua said the K2.7 billion Pasca A gas project in Gulf was expected to get off the ground soon following talks between the State and developer Twinza.
 
Kua claimed the deal reached between the State negotiating team and Twinza as the best by far in terms of petroleum resource development in the country.
 
The project is 95km south of Gulf Province and 100m deep.
 
Kua said the volume of reserves was 0.4 billion cubic feet. "This project throughout its life will give us a total benefit package of 55%, calculated on what financial modellers, and economists called as nominal cash flow basis," he said.
 
The 55% is made up of 2% royalty, according to the Oil and Gas Act (1998). There is no specific landowner as the resource is offshore, but benefits will go to the Gulf provincial government.
 
Twinza country manager Roppe Uyassi said first production was planned for the third quarter of 2025.
 
Twinza chief executive officer Robert Gard in August said the project would go ahead once the gas agreement was signed and the petroleum development licence (PDL) is approved.
 
"We are awaiting finalisation and signing of the gas agreement and approval of the petroleum development licence. We are ready to proceed with front-end engineering design and project financing arrangements," he said.
 
The benefits of the project include: K500 million per year to the State (tax, levies, royalties); K8.6 billion revenue to PNG over the life of the project; K18 billion contribution to gross domestic product over the life of the project; K400 million per year spent in PNG annual operating costs; and 300 construction and 500 permanent jobs in PNG both direct and indirect.
 
Gard said more than 70 local companies have already been identified as service providers to the ongoing operation.
 
"Direct jobs include offshore, supply base and office workers such as operating, maintenance, onshore support, marine support, catering staff, management and office support," he said.
 
"Indirect jobs include security, airline operations, hotel and transport, meals and catering supplies, spares and materials supply, helicopter logistics, training and professional services."
 
Twinza is an Australian upstream energy company developing the Pasca A liquids-rich gas field in the Gulf of Papua. The company has operated in PNG since 2011 and has invested over K350 million to fully evaluate the field.
 
Mining
 
There are no other major gold-copper project after those at Wafi-Golpu and Frieda River are developed, Mineral Resources Authority managing director Jerry Garry said recently. He said challenge for the industry now was the depletion of reserves.
 
The extractive industry accounts for 80% of the country's revenue. Garry said the only copper producing mine at Ok Tedi could be closed by 2032.
 
"If we get Wafi-Golpu and Frieda River off the ground, we will enjoy a healthy production outlook of around 500,000 tonnes a year to a maximum of 650,000 or 700,000 tonnes per annum, which will place PNG in the top six or top 10 copper producing nations in the coming years. That's a good outlook for copper.
 
"In gold, we will be reaching two million ounces a year going into 2023. So in terms of the outlook, it looks good. The challenge we have is the depletion of these major reserves that we have. When Wafi-Golpu and Frieda River are commissioned as mines, the reserves will be depleted with no more major reserves. The challenge for us now is to find the next Porgera, or next Ok Tedi, or the next Lihir," Garry said.
 
OK Tedi copper-gold mine: In June 2022, Ok Tedi Mining said in its 2021 report that the operation was transitioning from current lower grade ore to high grade ore sources.
 
In August, Ok Tedi said it was committed to ensuring that the closure of the mine was done in accordance with the approved mine closure plan when production ceases.
 
The plan which has been developed and updated since 1997 includes the decommissioning of mining infrastructure, rehabilitation of operation sites, ongoing monitoring of the affected environment, transfer of public infrastructure or services currently provided by Ok Tedi, and establishment of a fund to implement the plan.
 
 
Wafi-Golpu copper-gold project: In September, Morobe Province Governor Luther Wenge agreed to move ahead with the $5.4 billion (K18.5 billion) gold-copper project, withdrawing the court cases it filed against the 50-50 joint venture Newcrest has with Harmony Gold.
 
Wenge said the province was ready to sign the mining lease agreement to accept the mine, and the deep-sea tailing placement method of mine waste disposal. 
 
Lihir gold mine: Lihir in New Ireland Province is operated by Newcrest Mining and has contributed about K238 million in total tax and production levy to the hovernment, for the last financial year (July 2021 to June 2022). 
 
PNG country manager Stanley Komunt said an additional K85million was also paid to hovernment as royalties with K1.2 billion paid to PNG suppliers for operating costs and more than K553 million paid to Lihirian vendors. He said the company provided about $487 million (about K1.7 billion) to the country's foreign exchange balance.
 
Kainantu gold-silver-copper mine: In February 2022, operator K92 Mining said it had spent more than K30 million on exploration in 2021, and had K50 million budgeted for this year for exploration at its mine in Eastern Highlands. Chief executive officer John Lewins said its stage three expansion was expected to be commissioned in 2024.
 
The company continues to record good quarterly results.
 
Porgera gold mine: The Barrick Niugini Porgera gold mine in Enga Province has now been closed for more than three years, following the Marape's refusal to renew the special mining licence as he wanted the State to take a bigger cut of what was previously a successful operation.
 
The state negotiating team, Kumul and government have been unable to find a workable solution and Barrick Gold president and chief executive officer Mark Bristow in July said care and maintenance of the mine cost K35 million a month.
 
Barrick Niugini and Kumul finally signed in August. Following the signing of other agreements, New Porgera was established and the board first met in October 2022.
 
Meanwhile, lives have been destroyed, criminal activity increased and poverty is on the rise as Porgera service companies and local businesses collapsed.
 
Tolukuma gold mine: Locally owned company, Lole Mining, was given a 10-year mining licence for Tolukuma in Central Province. Founder and executive director Howard Lole said in that he hoped to make Lole a premier mining company in the country.
 
"I incorporated Lole Mining two years ago with an ambitious dream to make it a premier mining company in PNG one day in the future," Lole said last year.
 
Simberi gold mine: In May 2022, operator St Barbara reported that the front-end engineering and design study for the Simberi sulphide project in New Ireland was nearing completion.
 
The company said big increases in equipment and construction costs were being experienced across the industry and these trends were also evident in various components of the study.
 
The project was granted approval-in-principle for its sulphide expansion project by then Environment Minister Pogio Ghate on June 10.
 
The Simberi operations consists of an open cut mine on the northernmost island in the Tabar group of islands. The sulphide project was said to have the potential to extend the life of mine by at least 10 years.

 

topics

loader