COMMENTARY
MAY 28, 2023
One of the major achievements of the Pangu Pati-led Government of Prime Minister Hon. James Marape – since it took office on May 30, 2019 – has been its push to increase national gains from mining and gas projects. PM Marape’s Government celebrates its fourth year in office on Tuesday, May 30, 2023.
To contextualise, before 2019, earnings for Papua New Guinea were below 50 per cent from all our mining, oil and gas projects. To simply put, for every Dollar or Kina earned from a project, PNG was getting under 50 per cent while investors were getting over 50 per cent in terms of total project economic benefits.
For example, in the PNG LNG Project, total PNG benefits stacked up to 47 percent and while project developers got 53 percent of the project benefit pie. Lihir, Old Porgera and Ramu Nickel were much lower. This trend is being reversed by this Pangu-led Government.
Pangu came into office in 2019 to ‘take back more for PNG’ in its ambitious pursuit for economic independence of PNG. Four years on, three major projects signed plus the Papua LNG revisited, mean higher gains for PNG than past projects.
Porgera and Wafi-Golpu negotiations were protracted to ‘take back’ more for PNG at 53 percent and 57 percent respectively.
As a case-in-point, the Wafi-Golpu Agreement the Marape Government has secured is K6 billion more than the 2018 deal Peter O’Neill signed off for in 2018 – which forfeited 10 percent of our equity.
PM Marape, Petroleum Minister Hon. Kerenga Kua and their State Negotiating Team (SNT) also successfully delinked P’nyang LNG resources from Papua LNG Agreement that the O’Neill Government signed at a combined benefit of under 51 per cent.
Consistent with PM Marape’s Maiden Parliamentary Statement on May 30, 2019, that P’nyang is not part of Papua LNG, these two projects were relooked at separately. Papua LNG on its own has 51 per cent project economics gain for PNG. P’nyang LNG that Marape negotiated to be constructed after Papua LNG has a massive 62 per cent economic gain for PNG.
Many will be asking what constitutes the project economic pie. It includes revenue or benefit streams like Corporate Tax, Equity, Royalty, Levies, Additional Profit Tax, Fiscal Stability Tax, Dividend Withholding Tax, other taxes fees, etc.
All these entitlements of law are some times varied or waivered by Government to give incentives to the investors. The Marape Government, however, is maximising gains for the State and beneficiaries like Landowners and Provincial Governments by negotiating fair and hard pushing the limits.
I give you a few examples below:
- Better-defined royalty with only operational cost deductions, unlike in PNG LNG and others, where there are other built-in deductions. For instance, PNG LNG instead of paying at near 2 per cent royalty to landowners, only paid 1.2 per cent;
- Getting more outside of law, for instance, royalty secured for Porgera is 1 per cent extra and Wafi is 1.5 per cent extra;
- No free fiscal stability but at a prized premium, so Porgera, Wafi-Golpu and Pasca have 2 per cent fiscal stability;
- Additional community benefit funds like Wafi-Golpu developers agreeing to over K1.2 billion social environmental fund, on top of Government commitments, to Infrastructure Development Grants (IDG), Business Development Grants (BDG) and tax credit projects;
- Easy project financing terms with Investors; and
- More local content.
Hard, but fair, negotiations respecting investors return on investments have been the hallmark of PM Marape’s SNT to avoid investor-favoured agreements worded and signed.
Unlike past Governments that gave Lihir and Ramu Nickel mines long-term corporate tax holidays, Marape negotiations are pushing the boundary to get more for PNG beneficiaries without compromising investor returns on investment. Many, in both the mining and petroleum industries, were sceptical and held views that Marape’s nationalist focus on these resources sector would chase investors away.
Four years on, Barrick remains and is developing the New Porgera, Total remains and is developing Papua, ExxonMobil is developing P’nyang, Newcrest or Newmont is developing Wafi-Golpu and all in far better terms for PNG.
All these projects that PM Marape’s Pangu Government supervised to sign for development have over 50 per cent gain in as far as total project economic benefits. In fact, Porgera at 53 per cent, Wafi-Golpu at 56 per cent and P’nyang at 62 per cent are all testament to the grit of this Pangu Government that is fighting to take back more for PNG through tough but fair negotiations and not compromising PNG interests.
It is also good to know that these major investors clearly understood Marape’s vision to get a fairer take to look after a growing population in a growing country. All of these companies – ExxonMobil is the world’s biggest oil company, Total is the world’s biggest gas company, Newmont is the world’s biggest gold company and Barrick is the world’s second biggest gold company – need to be commended for understanding Marape’s push for more for PNG.
Exciting times are ahead for PNG over the next eight years as Porgera, Papua, Wafi-Golpu and P’nyang are progressed. Never before have four major projects with a total of over US$30 billion worth of development been progressed in four different parts of PNG.
These will definitely take PNG over the K200 billion economic threshold PM Marape stated in 2019 when he took over Government. ‘Take Back PNG’ and the economic independence focus are at work.
I was advised that Marape’s first election posters in 2002 were about oil, gas and gold; no wonder he is strong in these areas for our country.
Four tough years from 2019, with a lot of politics, COVID-19 in 2020, inflation from the ongoing Russia-Ukraine conflict, political court cases and no-confidence votes right through to elections in 2022, the Pangu-led Marape Government remains stronger than ever with over 52 MPs, up from 39 who won in the 2022 General Election.
PM Marape remains strong and committed to his Statement of Intent made on May 30, 2019. Read that if you want to understand PMJM and measure up to what he has been doing thus far.
I am satisfied he is doing exactly what he promised to do in the mining and petroleum sectors when he took office.
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