Ownership of mineral and petroleum resources

By GREG ANDERSON                                                                                                                                                                                                                                                 

 Executive Director

Papua New Guinea Chamber of Mines and Petroleum

 

In recent weeks there has been a great deal of publicity and media hype promoting private ownership of mineral, petroleum and even water resources as a simple recipe that will solve all the issues of resource development and benefit distribution.  The Chamber strongly believes that the arguments presented for private ownership of resources are grossly misleading and simplistic and will stop any future resource development in PNG.

Ownership of minerals and oil and gas resources is currently vested in the State.  Despite the frequent use of the words “resource owners” in the media to describe landowners from mining and petroleum areas, the only resource owner in PNG is the State.

State ownership of minerals is vital to the development of PNG as a Nation.  State control of resources allows them to be developed for the benefit of all citizens as required by the Constitution.  The resources are managed in an effective and orderly manner that is recognised internationally and accepted by the investor.  Private ownership of minerals means that a few lucky individuals could expect to become rich at the expense of the rest.  Papua New Guinea cannot develop as a Nation under these conditions; it would splinter into groups driven by self interest.  

An exploration tenement gives the holder the right to explore for minerals or oil and gas which is an expensive and high risk activity.  The explorer’s only security is the tenement and the guarantee provided by the State that the explorer will have the right to develop any discoveries made on the tenement in accordance with requirements and obligations set by the State.  If any potential explorer believes that the State will not, or cannot, provide this guarantee with an acceptable risk profile then the explorer will not invest exploration dollars.

The simple fact is that if a change is made to mineral ownership, exploration will die and there will be no new resource developments as the risk profile will be unacceptable to any potential developer. There will be a complete breakdown in the well established, internationally recognised system that underpins resource development in PNG.  There will be no benefits for anyone.

Whilst landowner support and agreement is integral to all current projects the State owns the resource and it issues a production licence over those resources for the benefit of all citizens. This situation provides the ultimate safeguard and provides a level of surety and confidence to the investor.  PNG’s success in resource development speaks for itself.

Papua New Guinea has one of the most equitable benefit sharing systems in the world for mining and petroleum developments.  The country has developed a formula for benefit sharing which is unique on a worldwide basis.  It includes the National Government, affected Provincial Governments and Local Level Governments, and the impacted communities.  Whilst the law states that the minerals belong to the State the benefit distribution clearly recognises the unique Melanesian cultural and traditional affinity to the land by prescribing a suite of benefits to the affected landowners.

The real issue with resource development in PNG is the lack of governance and transparency associated with the use of the benefits generated from resource development.  Change in ownership will not address this problem, it requires a fundamental shift in the way that governments and landowner leaders manage, utilise and distribute resource benefits and the way they report on this to their respective constituents.  It requires a major shift towards transparency, integrity and openness.

The National Government, Provincial Governments, and leaders of landowner companies and organisations need to regularly and comprehensively explain to their constituents the value of the benefits they receive and how they have been utilised.  For example, why is it that Provincial Governments that have received hundreds of millions of Kina rarely explain to the people the existence of these funds, let alone what has been achieved with them, or what are the plans for future expenditure and investment.  Where are the audited reports for the public to view? Similarly, many landowner companies have not produced annual reports, held regular meetings or conducted election of office bearers.

The Chamber firmly believes that private ownership of minerals is not a way forward for PNG. PNG equity in the country’s resource sector is growing year by year through investment by the Government, landowners, superannuation funds and individuals buying shares through the Port Moresby Stock Exchange.  If mineral ownership was privatised the fundamental question that investors would ask themselves is am I prepared to risk my money in a company operating in PNG. The answer that all investors will come up with is no, the risk is totally unacceptable. All Papua New Guineans know the greed and conflict that would arise.

The Chamber is opposed to any move to change State ownership of mineral and oil and gas resources to enrich a handful of fortunate landowners at the cost of all Papua New Guineans