Ok Tedi mine life extension study nearing completion

By MALUM NALU

A feasibility study into an additional 10-year mine life extension (MLE) of the giant Ok Tedi mine is in the final stages of completion, according to Ok Tedi Mining Ltd managing director and chief executive officer Nigel Parker, The National reports.

The cost of mine life extension is in the range of US$ 850 million

Parker told the PNG Sustainable Development Program (PNGSDP) annual report meeting on Tuesday that the MLE was awaiting final board approval, and submission of change notice to the state was expected to be by July 2012

Parker…feasibility study to be completed next month.-Nationalpic by MALUM NALU

Prior to the exit of Inmet, the OTML board and management embarked on the possibility of an additional 10-year MLE from 2015-2025.

“The Mt Fubilan deposit has the resource to continue,” Parker said.

“Mining methodology is a combination of open pit continuation and underground mining.”

He said focus issues were:

• ·         Stable waste dump for 350 – 500 million tonnes of waste rock;

• ·         Tailings to the riverine system;

• ·         Hydro geology of the high rain fall environment;

• ·         Community approvals; and

• ·         State of PNG approval / enabling legislation

There was also leveraging off the OTML PNG community relations and mining capability to enter into PNG exploration and JV activities.

Parker said in considering a mine life extension,  the OTML board and management focused on a number of prime issues:

• ·         The impact of the mine life extension on the environment is in the forefront of the feasibility: management was of the view that the constructability of a stable waste dump was possible. This view was supported by independent assessments; Tails would continue to be deposited to the riverine system; That the sourcing of a tails solution continued to be pursued; and That Non Acid Forming sediment was delivered to the Bige dredging programme to facilitate the close out of the dredged embankments.

• ·         That the project is financially viable and that it can be internally funded within the framework of continuing to support the State through direct/indirect taxes and dividends.

• ·         The cost of mine life extension is in the range of US$ 850 million; and

• ·         The continuation of OTML’s ability to support the people of the Western province in the absence of the Fly River provincial government’s capacity.

Wider consultation urged on K5 billion rice project

The Consultative Implementation and Monitoring Council (CIMC) has called on the government to consider wider public and private sector views  before endorsing the controversial K5 billion Central province rice project, The National reports.

 It said this was the consensus among participants at a recent agriculture conference in Lae organised by the CIMC.

 The project proposes to secure 100,000 hectares using customary land, under a special agriculture business lease (SABL), for the purpose of producing rice or other agricultural/economic activities, purportedly to cater for PNG’s domestic demand and export to overseas markets.

 “On the bargaining table is a request for 80% increase in tariff on imported rice (and levy on other domestic producers) to facilitate NAIL’s investment in the project,” the CIMC said.

 “There was considerable discussion on the subject in the plenary session and various presentations, during the conference.”

 The CIMC said while the proposed trading monopoly would be lucrative to the investor, most of the participants raised concerns as to whether:

·         The investor would realistically establish such a vast area of rice, without an initial pilot project;  

·         It would be feasible without major sustained protection; and

·         It could deliver the many promises the potential investor is making to the people of Central province and PNG as a whole.

 “Furthermore, while it is recognised that rice can grow in PNG, and many farmers across the country are now planting it, sometimes as an interim crop whilst developing tree crops, many suggested that this project is not feasible and is baseless because this company has not grown any rice in PNG to date, nor has such large scale mechanised (or hand grown/harvested) rice production been demonstrated, as viable or competitive,” CIMC said.

 In particular:

• ·         The company had not secured any/much of the PNG rice market yet through competitive means, let alone established any export trade;  

• ·         Securing 100,000 hectares of land for rice cultivation (which is roughly equivalent to all the land under oil palm production in PNG) would include replacing other existing land use by local communities, including betel nut growing areas as well as food gardens;  

• ·         As the project required technical know-how for it to commence, the proponents acknowledged large numbers of technical expertise would have to be brought in from outside, seemingly marginalising the landowners;  

• ·         Raising the current tariff threshold to levels anywhere near 80% would breach PNG’s international trade obligations, and resulting in retaliatory consequences;  

• ·         Having a monopolised market domestically, with all other industry participants, and ultimately consumers, paying import fees to the dominant player, was unlikely to be short-lived. Once monopolies were established, with heavy protective barriers (potentially pushing prices up threefold), the beneficiaries rarely gave them up readily, arguing that their venture needed the protection to maintain the viability of their industry. This may not have mattered too much in sugar, a non-essential item, but would be serious for a staple food, like rice.

Morauta concerned about sovereign wealth fund

By MALUM NALU

Public Enterprises Minister Sir Mekere Morauta has expressed concern about how that the soon-to-be-created Sovereign Wealth Fund (SWF) will be managed, The National reports.

He told the PNG Sustainable Development Program (PNGSDP) annual report at the Crowne Plaza in Port Moresby on Tuesday that despite the incredible mining and petroleum boom in the country, the government’s record was lamentable.

The pothole-filled Baruni back road leading to the LNG plant site outside Port Moresby. Despite the incredible mining and petroleum boom in PNG, government’s record in maintaining infrastructure is lamentable.-Nationalpic by MALUM NALU

“Transforming resource wealth into better living standards is the biggest single challenge facing our country,” Morauta said.

“If we can set up the SWF properly, keep sticky fingers off the money and channel funds into the right public investments, then the future is bright.

“We need leaders, organisations and the will to make this happen.

“Yes, it (SWF) will help to insulate the economy from Dutch Disease and inflation, and it will smooth out volatile revenue flows,” Morauta said.

“And if it is established properly, the SWF will also keep sticky fingers off the revenues and financial investments.

“But if the money to be drawn down from the SWF flows into an unreformed budget, then we are likely to see a repeat of the same old story: No discipline, no capacity to implement, no accountability; and thus no real development, no improvement in services for our people.

“If the Budget disperses money as it does now over a million and one so-called ‘priorities’, then what can we do to ensure that top priorities, such as maintaining national infrastructure, don’t miss out?

“If the public coffers are vulnerable to corruption and theft, then what can we do to put in place strong governance and accountability mechanisms and regimes?

“If government departments lack capacity and accountability, then what can we do to restructure the service delivery model to deliver results?”

Morauta said government and state-owned utilities needed to collaborate more with PNGSDP in order to deliver better infrastructure and basic services and rural development.

“If we continue to hold national investments hostage to the same government processes and departments that have failed us for so long, then we risk missing out on investing our resource revenues wisely,” he said.

“The last 10 years can be seen as years of lost opportunity and waste of resources:  we cannot afford to repeat the same mistakes and lose the opportunity now dawning before us.

“I believe that we can make a difference now by locking in some sensible decisions on how revenues from the SWF will be allocated, while at the same time putting in place strong organisations to spend the money effectively.

“I’ve therefore argued that the SWF should earmark dividend flows from PNG LNG - about K500m per year - for maintenance of national infrastructure, the provision of rural infrastructure and the recapitalisation of public enterprises.”

Morauta said the SWF that was being established was a new venture for government, but was not PNG’s first major fund for resource revenues.

“PNGSDP’s long-term Fund is a kind of quasi-SWF,” he said.

“It provides lessons for government on how careful investment and conservative management can protect funds, even though events such as the global financial crisis.

“Secondly, PNGSDP also faces the challenge of translating incomes from its resource revenues into infrastructure and services for the people of Western province and PNG.

“As I’ve discussed in the government context, this isn’t an easy task.

“Unfortunately, government can be slow to experiment with new approaches.

“And this is an area where government and PNG SDP should be swapping notes more.”

InterOil denies meeting Chevron for Gulf LNG talks

InterOil has not made comments to media regarding Chevron or others that might be interested in the development of the Gulf LNG Project, as reported in The National yesterday.

Corporate communications officer Damaris Minikula said in light of recent media reports, InterOil was following normal government processes and was complying with protocol by responding accordingly through the government regulator, Department of Petroleum and Energy, regarding the recent notice to terminate the 2009 Liquid Niugini Gas Project Agreement.

“InterOil is waiting for the government, through the Department of Petroleum and Energy, to respond accordingly,” she said,

Meanwhile, Australian Financial Review reports that InterOil’s ambitions to develop PNG’second LNG project appear close to collapse after a flare-up in tensions with the government over the structure of the venture.

PNG Petroleum Minister William Duma last Thursday issued a notice warning of the termination of a 2009 agreement that InterOil had with the government covering the framework for the LNG project.

He said InterOil needed to sell a majority stake in its gas resources in PNG to a major LNG operator, which would also run the LNG venture.

Relations between US-listed InterOil and the PNG government have been deteriorating over the past months in an increasingly bitter dispute over the project, which would be the second LNG venture to be developed in PNG after ExxonMobil’s $US15.7 billion project currently under construction.

InterOil and its affiliate Liquid Niugini Gas planned to develop InterOil’s Elk and Antelope gas fields using two LNG projects: an small onshore one with Australia’s Energy World Corporation and a fixed-floating one with Norway’s Flex LNG.

But the government wants instead one world-scale onshore project of at least 7.6 million tonnes per year of production, run by an internationally recognised LNG operator, along the lines of ExxonMobil’s project.

It is now advising it will terminate InterOil’s project agreement within 180 days, on the grounds that InterOil has not complied with its obligations and has breached the agreement.

“Unfortunately InterOil has for too long insisted on a development structure which is designed to only meet its objectives of controlling the asset and the pace of developing it,” Duma said in a media statement last Thursday.

“In the face of continuing obstruction of the implementation of the 2009 project agreement by InterOil and Liquid Niugini Gas Ltd I have therefore been left with no choice but to issue a notice of intention to terminate the project agreement.”

InterOil and Liquid Niugini Gas are fighting the bid by the government to cancel the project agreement.

In a May 21 letter to Rendle Rimua, the secretary of the Department of Petroleum and Energy, Liquid Niugini Gas director Christian Vinson said the government’s attempts to cancel the agreement were highly damaging to PNG’s international reputation as an investment destination.