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CONTENTS
BUSINESS 21 25 32 45 56 74
AUSTRALIA PNG BUSINESS FORUM, EXPO RELAUNCHED PM CALLS FOR PACIFIC REGIONAL SOLIDARITY COMMODITY PRICES TO REMAIN LOW HOW PNG FIRMS CAN HANDLE PROCUREMENT OK TEDI COMMITS PGK20M TO CURB COVID CASES LOCKDOWN WEIGHTED, ‘PEOPLE NOT LISTENING’
MINING 26 64 66 68
WEIR MINERALS LAUNCHES ANTI-ABRASION PANELS KINGSTON NOW OWNS 100% OF MISIMA GOLD K92 MINING POSTS RECORD 56% REVENUE HIKE TRAVEL BAN WON’T AFFECT LIHIR PROJECT - NEWCREST
Do women in your business have any of these safety concerns?
COMMENTARY
EVOLVING PAPUA (ELK/ANTELOPE) LNG PROJECT / page 10
AGRICULTURE
GOV’T INTERVENTION FOR COFFEE NEEDED / page 30
GENDER SMART SAFETY
The PPE is a hazard in itself - it’s so bulky and cumbersome because it’s made for men not for women. I don’t mind working hard but sometimes I just don’t have the strength to do the lifting they expect of me - I’m just not as strong as my male colleagues. I’ve had enough of being groped and harassed - it’s demoralizing and I’m finding it hard to concentrate. When are they going to design machinery with female operatorsmy safety is compromised every time I get in to this truck. The path to the accommodation block is so poorly lit - I run as fast as I can every time I have to use it
The Business Coalition for Women has Gender Smart Safety (GSS) solutions available to help your business improve the safety of your female staff through; Providing training & support to implement the GSS audit tools Providing advise on policy developments Evaluation of women's safety Helping business to audit &respond to issues affecting women's safety in the workplace Promoting best practice gender smart safety in the workplace
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www.pngbusinessnews.com • Issue 1 2021
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MINING 70 72
CONTENTS
ADYTON STARTS DRILLING AT GAMETA GOLD PROJECT MRA SEEKS VIEWS OVER SIMBERI GOLD PROJECT
COMPANIES 40 46 48 50
KINA BANK POSTS STRONG GROWTH DESPITE COVID ATLAS STEEL INTRODUCES MODULAR HOUSES SAFETY OF WOMEN IS A SUCCESS TO BUSINESS KINA BANK SUPPORTS KTF EDUCATION PROGRAM
COVER STORY
POWERING PAPUA NEW GUINEA, EMPOWERING COMMUNITIES / page 36
BUSINESS
FINANCE
/ page 42
/ page 34
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9
COMMENTARY
Evolving Papua (Elk/Antelope) LNG Project: From prospecting to gas discoveries and to LNG project development By Roger Kewa Avinaga Background – Petroleum Industry in Papua New Guinea
T
he exploration for petroleum in Papua New Guinea has a long history which dates back to early 1900s. It began with a group of Australian geologists who first came in 1913 to PNG to investigate prospects of hydrocarbon on behalf of the Australian Government. Since then exploration activities went on without commercial discoveries until 1986 when Iagifu-Hedinia well was discovered. First commercial production commenced in 1992 with Kutubu coming on production followed by Gobe and Moran PNG reached a peak production of 150,000 barrels of oil per day in 1993 but since then it has been steadily declining as a result of natural depletion of the discovered oil resources. While searching for oil, large volumes of gas of commercial quantities have been discovered in the country. The gas reserves may be categorized based on three stages of maturity. Stage 1 gas include gas already in production, in particular, PNG LNG trains. State 2 of the gas include an estimated 15 tcf proposed for development. Papua LNG, P’nyang, Pasca and Stanley make up this component of gas. A further 7 tcf of mostly stranded gas fields retained under PRLs remain to be developed. This class of gas discoveries have no plan of development in the foreseeable future. In terms of proven, probable and possible (3P) gas reserves stand at 25.5 tcf while overall gas reserves potential is in order of 40 tcf. In relative terms PNG has more gas than oil. Huge gas resources are the basis for building a gas industry in PNG and the Government has long-term perspective of building a gas industry in PNG. Having regard, a number of gas development proposals have been initiated and promoted by the developers for development. PNG now hosts a world class LNG Project – the ExxonMobil led PNG LNG Project which commenced production in May 2014. The PNG LNG Project is the
single largest investment that has ever occurred in the country. Not only that but it stands as the first gas project to be developed, and it serves as a catalyst for further gas development to take place in the country. PNG LNG has to date been the major source of revenue generation, infrastructure development, employment opportunities for many Papua New Guineans, training and skills transfer, community development, among others. Among the proposals that have been looked at Papua LNG, P’nyang, Pasca, Stanley are among the proposed projects lined up for development. The country also has more than ten stranded gas fields under Petroleum Retention Licenses (PRLs). These discovered gas resources cannot be developed on standalone basis due to the nature of the volume content; insufficient for commercialisation and the
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PNG Business News is published independently in the Philippines for the PNG Business community.
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Printed in Papua New Guinea by Biz Print • Commentaries and contributed articles published in this magazine are the views of their authors and do not necessarily reflect the views of PNG Business News – our main role is to provide our readers in PNG and the region with a digest of business news in various sectors of Papua New Guinea.
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COMMENTARY
< From Page 10 gas fields are isolated meaning they sit away from any form of communication and infrastructure development. To develop them individually would be very costly and uneconomical. Papua LNG Project The Papua LNG Project has evolved from the prospecting stage, to the discovery of Elk/Antelope gas resources, to signing of the Papua LNG Gas Agreement and now to LNG development. The discovery of the Elk/Antelope gas resources which is located in the Gulf Province has given prominence to developing these gas resources in the country. The previous owner and operator InterOil proposed for a LNG project to be supported by the Elk/Antelope gas resources. Following the discovery of the gas resources several gas development schemes were announced by InterOil but none of the proposals advanced to development phase. The country’s expectations for superior benefits from developing Papua LNG Project have been high. Why wouldn’t the country aspire to greater benefits from its premier resources – the gas resources? Such expectations have been on the back of “missed opportunities” from the first ever largest resource project – the PNG LNG Project that the country hosts. The general view among Papua New Guineans have been that any future gas resource development that followed the PNG LNG Project must generate superior benefits, higher and greater than those produced by the first LNG project. In order of the new gas projects proposed for development in the country Papua LNG has its nose in front of others. The recent signing of the Fiscal Stability Agreement re-affirms the parties’ commitment to progress the project to development stage. Fiscal Stability Agreement The companies expect the global economic environment to be right providing an economic environment conducive before they can commit to huge investments especially, investing in major resources
12 www.pngbusinessnews.com • Issue 1 2021
projects. Economic conditions must be attractive enough for them to develop world class projects. The key factors such as oil price in which gas price is linked, gas markets and other conditions must be right as their movements can negatively or positively impact on return on investment. Unexpected global pandemics such as COVID 19 have devastative impacts on the petroleum industry. The petroleum industry is still trying to find its position from the impacts of the pandemic in 2020 and 2021. At national level the role of the host Government is critical in the development of key resource projects such as Papua LNG Project. The companies’ desire is to see Governments providing fiscal, legislative, policy regimes and stability for investments to take place in the country. The Fiscal Stability Agreement signed on the 9th of January 2021 between the Independent State of PNG and the Papua LNG Project Participants re-affirm the Government’s commitment that it will not temper with the fiscal terms that were agreed between the parties in the Gas Agreement executed in April 2019. The Project Participants will make significant investments in developing the Elk/ Antelope gas resources hence, they expect risk free environment. It is imperative on the part of the Government of PNG to ensure there are sufficient assurances and stability accorded to the companies during the development and operation phases of the Papua LNG Project. In this respect, the assistance and co-operation of the project host government is critical for projects to be developed. The role of the Fiscal Stability Agreement is to provide sense of comfort and assurance on the part of the Government of PNG that it will commit to the terms agreed in the Gas Agreement and any future changes to the fiscal regime by the Government will not apply on the terms agreed for the Papua LNG Project. The Fiscal Stability Agreement is not a separate agreement from the Gas Agreement signed two years ago. It rather serves as an annexure to the Gas Agreement. The Fiscal Stability Agreement is part and parcel of the Gas Agreement. The Fiscal Stability Agreement is required to give confidence to the investors of the stability of the project. From the perspective of the Project Participants the Fiscal Stability Agreement should provide stabil-
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COMMENTARY < From Page 12 ity, sense of security and mitigate political and fiscal risks that may distort the delivery of the project. The Elk/Antelope Gas Fields The Elk/Antelope gas fields have their origins in one of the largest prospecting areas InterOil initially applied for in the late 1990s. The maximum number of blocks an applicant can apply for a prospecting license under the Oil and Gas Act 1998 is 200 blocks which equates to 16,000 square kilometres. A block is equivalent to nine kilometres by nine kilometres so 200 blocks would aggregate to 16,00km2. The original PPL that now hosts Petroleum Retention License (PRL 15) was top filled and PPL 238 issued to InterOil in March 2003 as a consequence of the Fiscal Incentives the Somare Government introduced at the time. The incentive package was introduced to encourage and reverse the dwindling exploration sector in the country. The incentives paid off resulting in reversing the fast declining exploration sector to one of active exploration sectors in the country. InterOil’s primary focus in Papua New Guinea was to establish an oil refinery which it was successfully awarded the first Petroleum Processing Facility License (PPFL1) to develop and operate the Napa Napa Oil Refinery. While pursuing oil refinery project InterOil decided to enter upstream exploration sector. The areas InterOil applied for were “frontier” areas, not many companies were interested in. Many oil companies concentrated their efforts on the proven oil province; further west especially in the Southern Highlands, Hela and Western Provinces. Little did they know that this area was highly prospective with chance of major gas discoveries in the country. InterOil was convinced it would discover hydrocarbon and so it did after years of active exploration work. The gas fields that underpin the Papua LNG Project sit in two gas fields namely Elk and Antelope. These gas fields were named after animals found especially in Canada since the original owners Phil Mulacek and Christian Vinson are Canadians. The Elk 1 well registered a gas discovery on 26th June 2006 in PPL 238 which later changed to PPL 476. On 01st May 2008, the Antelope 1 and Elk 4 wells registered gas discoveries in PPL 237/238 which later became PPLs 475 and 476 respectively. Subsequently, wells were drilled successfully in PPLs 237 and 238. These discoveries and further work that current Operator Total has undertaken since taking over the Elk/Antelope gas fields provide the foundation volume for the proposed Papua LNG Project. In order to confirm the discovered gas InterOil engaged resource certification companies including GLJ and Knowledge Reservoir to provide assessment of the gas resources in the Elk/Antelope fields. In 2008 and 2009 GLJ concluded that the fields combined contained more than 8 tcf (trillion cubic feet) of gas and over 100 mmbbls of condensate contingent resources. Upon receiving the reserve certification reports the Government of PNG needed second opinion so it engaged Gaffney Cline & Associates (GCA) to provide a 3rd party certification of the Elk/Antelope gas resources. The GCA report produced total 2P recoverable sales gas resources in the Elk/Antelope fields of 6.5 tcf. However, GCA indicated that the above volumes did not take into account 5% CO2, fuel and flaring so the Department of Petroleum assessed that the saleable gas resources would be about 4.85 tcf when it took these qualifications into account. It was also
14 www.pngbusinessnews.com • Issue 1 2021
recommended that further appraisal wells should be drilled to ascertain full extent of the reservoir and increase the level of confidence in the resource finds. When Total took over operation of the project one of the key tasks was to work on improving the gas resources. The company undertook aggressive upstream work. The aggress efforts both the previous and the current operator have put into the upstream exploration including drilling and appraisal work programs further improved the discovered gas resources. The Gas Agreement clearly has more than the 8 tcf InterOil estimated at the time as the foundation gas underpinning the Papua LNG Project. Petroleum Retention License (PRL 15) Award The discovery of gas leading up to the declaration of location as per the requirements of the Oil and Gas Act 1998 enabled InterOil to successfully apply for a Petroleum Retention License over the blocks that contained the discovered gas resources. On 30th November 2010, InterOil was granted PRL 15 over the 9 blocks covering the Elk and Antelope gas fields. As required by the oil and gas law InterOil had submitted approved work program and expenditure proposals for implementation during the term of the PRL. InterOil, as the holder of PRL 15 committed to implementing work programs including additional wells, seismic and geoscience studies, social mapping, social mapping and marketing studies. The intent of a Petroleum Retention Licence is for the license holder to retain the discovered gas while further work is undertaken for commercialisation of the discovered resources. In assessing an application for a PRL there must be an economics assessment justifying that the gas discovery is not commercial to develop thus it should be retained under a PRL requiring further commercialisation studies to be undertaken. It is to be noted that PRL 15 was granted having passed the commerciality test. The PRL provided the impetus to the license holder to retain the asset and further work continued.
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COMMENTARY < From Page 14 Concepts for Developing of Elk/Antelope Gas Resources The gas resources that InterOil discovered provide the resource base for development. InterOil since the discovery of the gas had started considering a number of development schemes to develop the Elk/Antelope gas. This led to the signing of the Project Agreement which was signed on 23rd December 2009 between the Independent State of Papua New Guinea and LNGL (Liquid Niugini Gas Limited). Under the agreement it was agreed that LNGL and InterOil would develop a 2 train 7.6 to 10.6 mtpa capacity LNG project. The term of the Project Agreement was tied to the term of the Petroleum Development License (“PDL”), which is 25 years plus 20 years extension of the license. The Project Agreement, amongst other things, set out the fiscal terms to apply to the project. In summary, the key aspects of the project described in the Project Agreement constitute the following: • To be a World Class Project (project size and scope of international scale and quality); • To produce LNG using internationally recognised technology; • To be operated by internationally recognised and reputable operator experienced in operating LNG liquefaction facilities and assets similar in size, scale and nature of the Project Assets • To be located at, about or near the InterOil refinery, Napa Napa, Port Moresby or at such other location, provided that the State has approved such other location in writing; and • To have a manufacturing capacity of between 7.6 million and 10.6 million tons of LNG per annum. It was clear at the time that the intention was for this project to match the ExxonMobil-led PNG LNG Project in terms of scale, performance and quality and to be operated by a highly experienced, internationally reputable operator. On account of the similarity of the two LNG projects it was determined that the State would offer LNGL Project bag of fiscal terms similar to the ones offered to the PNG LNG Project. However, for several years since the signing of the Gas Agreement InterOil did not secure a partner it was looking for. In fact, there were parties InterOil approached from mid-2009 with the objective of securing an operator but these efforts were not successful. The delay was a cause for concern for the Government of Papua New Guinea. For example, the Minister for Petroleum and Energy and Secretary of the Department at the time sought clarification on the development of the project and the status on securing partner/operator of the project. While search for a reputable partner to develop the project was going on announcements relating to the development of the project of different character in the Gulf Province were made. On 15th April 2010, InterOil announced that it would develop a condensate stripping project together with Mitsui & Co. Ltd of Japan using the Elk/Antelope gas. On the 28th of September 2010 it also announced that it would pursue small LNG projects with capacities of 2 to 3 mpta. Subsequently, InterOil announced smaller project concepts. InterOil further proposed a
16 www.pngbusinessnews.com • Issue 1 2021
50/50 gas development split with the State where it would acquire additional 27.5% interests on commercial terms, in addition to its legal right to a 22.5% participation interest in the project. As can be noted, the project had deviated from the original project concept outlined in the 2009 Gas Agreement largely owing to the fact that the project development concepts announced by InterOil were of small scale. None of the proposed development concepts were able to match the project concept described in the 2009 Gas Agreement. InterOil and its partner LNGL had executed Heads of Agreement with Energy World Corporation Limited (“EWC”) and separately with FLEX LNG Limited and Samsung Heavy Industries for development of a floating LNG plant. The proposal comprised the following features: • An initial land-based LNG plant of 2 mtpa comprising four trains of 0.5 mtpa; • Additional trains of 2 mtpa to be added each year until a total capacity of 8 mtpa is achieved; • A fixed floating LNG plant of 2 mtpa; and • A condensate stripping plant. However, none of these concepts were translated into gas projects. The same story remained throughout the period that InterOil had promoted the development of the Elk/Antelope gas resources since the signing of the Gas Agreement in 2009 until Total; the French oil giant appeared on the scene. The Entry of Total SA as Operator of the Elk/ Antelope (Papua LNG) Project The efforts that InterOil had put in since the signing of the Gas Agreement finally paid off when a new partner Total was selected from among the oil majors known to many Papua New Guineans including ExxonMobil, Chevron, Shell, British Petroleum (BP) as well as other familiar names in PNG such as Oil Search, Talisman Energy, Horizon Oil and Santos. The new entrant Total was a new face in PNG. To be appointed a partner in the country’s Second LNG Project, especially to a company not familiar with PNG this French National Oil Company brought a new perspective to developing the country’s gas resources. Many of the people who followed InterOil’s final countdown of selecting a partner were most probably expecting some familiar names in PNG. Nevertheless, the key thing to note is that agreement between Total and InterOil followed an extensive international competitive bidding and evaluation process for development of InterOil’s interests in Papua New Guinea that InterOil had promoted since 2009. Under the agreement Total would lead the construction of the project and operate the proposed integrated LNG project. The parties further agreed
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COMMENTARY < From Page 16 that a final investment decision, reserves certification, basis of design and front-end engineering and design would follow. Total in its own right is an undisputed oil major and LNG player but new to this part of the world as confirmed to Business Advantage PNG by Total’s Managing Director in PNG, Philippe Blanchard; “When you are a French person like me, coming to work in PNG, it is like going to the other side of earth, working in an environment that has nothing in common with Europe. The Asia-Pacific region has a completely different mindset—challenges everywhere and, personally speaking, many things to discover. It’s a complete change to what I have been accustomed to in Europe or even Africa. It is really exciting”. The company undoubtedly had set its plan to develop Elk/Antelope gas resources and so it successfully won the operatorship as well as acquisition of a major stake in the project. However, the transition was not as straight forward as it desired. Total had to overcome legal challenge from Oil Search Limited which claimed that the PNG based company had transacted a deal with InterOil and therefore had pre-emptive rights. The arbitration however found that this was not the case. The commitment by Total to deliver the Papua LNG Project was demonstrated at the outset. A few months after its entry into PNG the Total’s Managing Director informed Business Advantage PNG this; “We are experienced in LNG. We are present in the whole value-added chain of PNG projects from upstream assets, to building LNG trains and trading LNG products. We are the second actor after Shell in this business. We will take advantage of the experience and knowledge of all our partners to be able to deliver together a good project. So we want to put this arbitration period behind us and we want to fully restore the relationship with our co-venturers. We believe there is plenty to do to deliver the project and we need the energy of everybody” Mr. Philippe Blanchard further added: “We are committed to the project. We have already made a big investment before we entered the license. It is clear our interest is to deliver the project.” It became apparent that the French oil major was destined to make an unprecedented impact on the country’s petroleum resources sector. The company was particularly focused on delivering the Papua LNG Project. It was obvious from the outset of the takeover that the Elk/Antelope is a significant project in Total’s global portfolio and clearly this asset in Papua New Guinea provides an opportunity to grow and expand its business in the Asia-Pacific region. The acquisition of an interest in the Elk/Antelope project was a significant investment in large discovered resources which provides exciting opportunity for the French company to develop a new gas production and liquefaction hub in this part of the world. Clearly, the PNG asset added value to its long term player as a LNG player on the global stage. Total’s acquisition of PNG asset did not stop at PRL 15. The company also had an option to take an interest in all of InterOil’s exploration leases in Papua New Guinea including PPLs 236, 237 and 238 which InterOil continued to operate at the time. The understanding between Total and InterOil was moreover to explore other business opportunities both in Papua New Guinea and elsewhere in the Asia Pacific region. On project front Total quickly established a strong relationship with its joint venturers and strong sup-
18 www.pngbusinessnews.com • Issue 1 2021
port from the Papua New Guinea Government. This made Total settle in this part of the world where it hadn’t made much presence, and looked forward to developing the LNG project. In the ensuing years that followed since its entry into the country’s oil and gas sector Total took over the operatorship of the Papua LNG Project. It also brokered formidable Joint Venture partnership with the existing players in PNG including ExxonMobil and Oil Search. Total has also worked with PNG’s National Oil Company – Kumul Petroleum in view of the State’s legal right to participate in the project. The State participation is formally exercised at the time of PDL award but it is important to establish some level of relationship with a key national partner Kumul Petroleum. The NOC, using its network and connection with the Government has played key role in progressing the Papua LNG Project to date. To successfully pull off major agreements such as the 2019 Gas Agreement and the Fiscal Stability Agreement Kumul Petroleum has played key role between the Project Participants and the Government in order for the parties to agree and execute such complex and important agreements. The recently signed Fiscal Stability Agreement now paves way for a key milestone to be undertaken which is FEED (Front-End Engineering and Design Studies). FEED normally take up to 18 months but its completion will lead to developing Papua LNG Project. Further work included social mapping, landowner identification, environmental impact assessment, license and administration, among others. This will take the project to Project Sanction and reaching FID (Final Investment Decision).
Philippe Blanchard, Managing Director, Total PNG
Project Benefits The recent execution of the Fiscal Stability Agreement signals that Papua New Guinea will host its second LNG project. This will be a world class LNG Project staged in the country and based on its magnitude the project is expected to generate multiple benefits, both direct and indirect. The direct benefits will be generated via the fiscal terms that have been negotiated in the Papua LNG Gas Agreement which was executed between the PNG State and the Total led Project Participants in April 2019. The Fiscal Stability Agreement signed in January 2021 between the parties confirms and provide the stability over the fiscal terms. In Papua New Guinea the legislated fiscal regime for petroleum projects has been the basis for oil and gas investment in the country. The fiscal regime has also undergone numerous adjustments over the years. Nevertheless, the core elements remain to this point. The key features include production-based levies, the taxation of company profits and an additional profits tax that kicks in only when profits exceed a
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COMMENTARY < From Page 18 pre-determined level, particularly in the year in which the accumulated value of “net cash receipts” becomes positive and State participation. The new main features that have been introduced in the Papua LNG Gas Agreement include production levy and up to 5% DMO. The headline terms of the Standard regime are set out in the table below:
The main fiscal terms that make up the Standard terms comprises Corporate Tax, Royalty, Development Levy, Additional Profit Tax, Dividend Withholding Tax, Import Duty Tax, Export Duty and State Participation. Despite the fact that Standard Fiscal Terms applicable to gas operations are legislated or defined in the Government policies each term is negotiated per project. The companies prefer exemptions and incentives awarded to them. The PNG LNG Project has an agreed set of fiscal terms which is applicable to the project. The Papua LNG Project will have the fiscal terms that were negotiated and agreed by the parties. Future gas projects will have specific fiscal terms negotiated and agreed between the State and the Project Participants. Announcements made by the Government and the Project Participants following the signing of the Papua LNG Gas Agreement indicate that the parties have agreed on fiscal terms that may be best summarized as follows; • Tax on integrated project basis, not segmented basis as the Papua LNG Project is envisaged to be development on the integrated basis • The fiscal terms apply to all PRL 15 gas, • Main fiscal terms including Corporate Tax, Royalty, Development Levy and APT to apply. But Import/Export taxes, Withholding taxes exempted as well as GST zero rated • New fiscal devices introduced in the Papua LNG Project include Production Levy and DMO provision. • State Participation at 22.5% Direct project benefits to the State will be generated via the fiscal terms that have been agreed between the State and the Project Participants. However, as regards indirect benefits to the State there aren’t set formula based on which benefits from the project would be generated. Benefits such as schools, health facilities, roads, community projects, infrastructure projects and pin off business activities are counted as indirect benefits. The fact is that the indirect benefits do not have defined formula in which the benefits will be determined. Important Government policies in relation to indirect benefits are not defined. Recently, the Government has attempted to develop policies around Domestic Market Obligation (DMO), National Content Policy and Third Party Access but these policies are yet to be developed and approved by the Government. Given the obvious absence of fully defined policies it is impossible to quantify the indirect benefits to the
20 www.pngbusinessnews.com • Issue 1 2021
State. This remains a grey area the Government must work harder. One way the Government of PNG can benefit more from its resources development is to negotiate hard on the indirect benefits. This is where National Content policy becomes so critical; essentially this may ascertain how much of the benefits would benefit the country. It is to be noted that what is not known is the indirect benefits expected to be gener-
ated by the project. It is difficult and more challenging to predict indirect benefits especially, before the project has been developed. Clearly defined Government policies in relation to the indirect benefits are needed to ensure the country benefits from its resource development. For example, the National Content Policy should define and state how much of the capital expenditure during construction should be spent in the country. There should be similar policy in relation to the ongoing operating expenses. The ad hoc handling of the indirect benefits to date has left the country missing on important benefits that emanates from resource project development. Project Benefit Projections On comparative basis the projected direct benefits from Papua LNG may be compared with two other petroleum projects in the country. These include Oil Projects and PNG LNG Project. Oil production to end of 2019 from all PNG oil fields including Kutubu, Gobe and Moran was estimated at more than 531 million barrels (Mbbl) of oil. Assuming at an average oil price of $50 per barrel oil has generated an estimated US$20 billion plus on gross revenue basis. Kutubu attracted approximately US$1 billion in capital expenditure for development plus US$350 million in exploration cost. This was the major investment undertaken at the time to develop the major oil project in Papua New Guinea. The PNG LNG Project cost US$19 billion in capital expenditure. PNG LNG had a foundation volume of 6.9 tcf. Assuming that LNG is sold at an average gas price of US$12/mmbtu this will generate around US$80 billion in gross revenues. However, the project has been subject of recent down turn in the global market due to global pandemic. It is now general knowledge that the gas price has been rock bottom in 2020. The operating cost and other factors do impact on the overall project revenues though this may be offset by increased production. PNG LNG Project connects several PDLs and covers approximately 700 kilometres of pipeline infrastructure from the upstream gas fields to the LNG plant site near Port Moresby. The project remains the country’s largest investment ever undertaken in the country. PNG LNG Project since coming on production in May 2014 has been the source of revenue generation, employment, infrastructure development, community development and host of other benefits to the country. Relativity to PNG LNG the proposed Papua LNG is expected to cost less. Papua LNG project deviates
To Page 24 >
BUSINESS NEWS
Australia PNG Business Forum and Trade Expo relaunched
T
he Australia Papua New Guinea Business Council and the Business Council of Papua New Guinea are pleased to be re-launching the 36th Australia Papua New Guinea Business Forum and Trade Expo, which was deferred from 2020 to 24 to 26 May 2021. For the first time ever, this event will be held concurrently in Brisbane (at the Royal International Convention Centre), and online, with a common speaking program. The Forum theme for this year is “Reimagining the Future Papua New Guinea”. The theme aims to capture the important message that Australia and Papua New Guinea along with the rest of the world, must move and pivot with the times and circumstances to prosper. It also looks to advance discussion about greater diversity in the PNG economy. Coronavirus and all its related restrictions and issues, along with advancements in technology mean that we must, collec-
tively, think of different ways to work in trade, economy and indeed life. Online connectivity appears to be one of the important forms of communication that will continue for the foreseeable future. This Forum is distinctly established as the leading annual bilateral business meeting between Australia and Papua New Guinea and builds on the work both Councils have done over more than three decades in growing the bilateral business relationship. The program for the Forum includes an overview of the political and economic climate, particularly issues which affect business and investment, and will include specific sessions by expert presenters on topics such as the Covid-19 Pandemic, emerging economic business opportunities in PNG, agribusiness, infrastructure, SME growth, Papua New Guineans in the Australian labour market, and
resources. Key government ministers from Australia and Papua New Guinea, and a range of other expert speakers, have been invited to address the Forum to inform business representatives of policy issues in their portfolio relevant to business, and they will be able to join us from whichever location they are in, whether Brisbane, Papua New Guinea or elsewhere. Delegates will be able to engage in lively interaction with presenters in most sessions via the online platform with a Q&A feature. Video recordings of presentations will become available online soon after they are given so that delegates may go back and revisit portions they may have missed. There is something in the program for just about anyone who has an interest in the bilateral business and economic relationship and in the economy of Papua New Guinea. Delegates will be able to
To Page 25 >
www.pngbusinessnews.com • Issue 1 2021 21
GREAT EXPECTATIONS
When Papua New Guinea’s most esteemed property developer builds new luxury apartments in Port Moresby’s prime location, it’s not unreasonable to presume great expectations. Airways Residences again leads the way with an expansion project that raises the bar with affordable luxury apartments only minutes from downtown Port Moresby. The C Residences 8 project offers fully serviced, well-appointed residential apartments with spectacular outlooks of Bootless Bay and the distant Owen Stanley ranges. Complete with modern amenities, these gorgeous apartments amongst beautifully kept parklands add practical conveniences such as a private Recreation Park, a mini supermarket, pharmacy and a bank/ATM. Sharing the gated garden estate is the South Pacific’s most awarded five-star resort Airways Hotel. Hotel guests and residents can savour various top-class restaurants and bars, swimming pool, Airways Health Club and award-winning Bliss Day Spa. Recognised for its unique design and high-level standards and facilities, C Residences 8 Residential Apartments recently became the International Award Winner with Asia Property Awards. With completion due in August, flexible leasing terms have opened for their 20 three-bedroom and four two-bedroom spacious apartments. “It’s the extraordinary value of living complete with ultimate amenities at your doorstep that makes us distinct and popular,” explains Kevin Wells, General Manager Airways Residences. Residents live safely and securely in an oasis of natural landscapes that fosters social distancing. And all residences and exclusive on-site facilities are hygienically cleaned regularly. C Residences 8 builds on Airways Residences longstanding success of providing its Residents comprehensive lifestyle solutions. And in this day and age, to live how you want, without sacrificing safety and living standards, should not be a privilege but rather a necessity for everyone. Find out more contact Airways Residences General Manager E: kevinwells@airways.com.pg
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COMMENTARY
< From Page 20 from the first LNG project on many fronts. The ELK/ Antelope gas will be extracted from a single PDL and the pipeline infrastructure will cover shorter distance from the upstream to the LNG processing plant site. Based on public information Papua LNG is anticipated to cost over US$12 billion and the foundation volume is estimated higher by about 3 tcf relativity to PNG LNG’s foundation volume. Assuming that gas price averages US$12/mmbtu the Papua LNG could generate over US$100 billion in gross revenue. Comparatively, Papua LNG will kick start as low cost and high volume project. Assuming that gas price averages above US$10/mmbtu Papua LNG is destined to be a high yielding project. However, Papua LNG Project is not immune to the unpredictable down turn in gas prices, high operating cost and other factors that may impact negatively on the revenue generation. The indications are that revenue anticipated from Papua LNG will be higher. This means that more revenue is envisaged for the Government. Papua LNG is a key project in terms of revenue generation and so it must be supported by the Government. The Government’s undivided support for the project has already About the Author
Roger Kewa Avinaga is an accomplished corporate and government executive and Board Director having worked in oil, gas, mining and energy sectors for 20 plus years. He also worked for an international organisation – The World Bank Group. He has in-depth knowledge, understanding and experience of business/commercial environment, financing, project procurement and management, economic/financial modelling, fiscal and regulatory regimes acquired through dealing with oil/mining companies, investors, banks/ lenders, multilateral institutions, Govern-
been demonstrated in delivering two pillar agreements: Papua LNG Gas Agreement and the Fiscal Stability Agreement. But that is not all. The Government will issue the licenses at an appropriate time. This will depend on Total delivering PDL requirements which include FEED, Landowner Identification and Social Mapping, Environmental Assessment, among others. Among the oil producing countries PNG has been recognised as oil producer since 1992. In 2014, PNG entered the exclusive club of LNG producers in the world. The project serves as a catalyst for future gas development in the country. More gas development means more benefits to the country. However, the critical point to state here is this. As a country, how has PNG featured in managing huge benefits from oil projects and now PNG LNG? Have these benefits actually translated into improving the lives of the people, especially the rural population? Prior to Papua LNG commencing production in the next 5/6 years, P’nyang and others reach development stage the Government’s priorities and policies must be set differently from what has been the norm, ultimately targeted at improving the lives of the people and advancing the country forward.
ments and key stakeholders in exploring new business opportunities, creating partnership, joint ventures, farm-out, project approval process and initiation to of major resource projects. Roger is highly skilled in developing investment strategies, business plans and strategies, financing proposals, economic/financial modelling and assessment of projects, negotiating project agreements/contracts, managing risks and writing Government policies. He has demonstrable understanding of different segments of the industries from the upstream exploration and development, midstream, and downstream sector.
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BUSINESS NEWS
Marape calls for Pacific regional solidarity on Micronesia exit
P
rime Minister James Marape on February 16 expressed sorrow on the recent decision taken by the Micronesian Presidents’ Summit in a Communique to formally exit from the Pacific Islands Forum (PIF). “I note this decision, and Papua New Guinea respects completely, the rights of the Micronesian Presidents’ Group, to make such decisions,” said Prime Minister Marape. But in the interest of regional stability Papua New Guinea proposes that, the PIF immediately reviews its charter and processes to ensure it is relevant to matters concerning all areas as well as a sub-regional balance in its structure, functions and mandate now and into the future. “My strong views in terms of amicable solution is for the Secretary General’s position to be rotated amongst the three sub-regions for a four-year term, non-contestable upon expiry. This will strike a balance in terms of fair
representation and composition of PIF,” the Prime Minister said. “These are amongst other proposals I will be putting forward to ensure all voices are heard and I appeal for the Micronesian Group to remain with the PIF whilst we collectively work to reform it to ensure all Members’ rights are respected and preserved in the true “Pacific Way”. “I wish to place on record Papua New Guinea’s unequivocal support to all Micronesian Island States now and into the future and seek their collective wisdom and understanding to reconsider their decision. In fact, I have written to the Chair of the Micronesian Presidents’ Summit and President of Nauru H.E. Lionel Rouwen Aingimea, MP on this matter. “The Forum has survived and achieved much together in its 50year journey and we are at a particularly trying time in our region’s history in terms of the challenges that we face.
“I remain confident in the political leadership of our region in that we can find a way forward together as one voice to address our regional issues and development challenges that we are presently confronted with. “With contemporary global and regional issues like the climate change and sea level rising, our blue Pacific economic matters, regional and global trade including the use of our sea and air spaces, the collective muscle of our unity is better than smaller individual voices and PNG would like to appeal to our sisters and brothers of Micronesia through their leadership to remain in PIF and join PNG reforming PIF from within then from outside. “As a leader who voted with the Micronesians in the recent Secretary General vote, I will offer them my support for their line of thought on reforms to PIF they may also propose,” said Prime Minister Marape.
location are limited and demand will be heavy. To register, complete the online booking process at https://events.apngbc.org. au/event/36APNG/. Please take care to show how/where you wish to participate. There are many new features that we will be introducing during this Forum as we look to resume regular business to business engagement, which has been so disrupted during the last year. This is an incredibly good value conference. Enquiries about registration,
Trade Expo bookings and accommodation should be directed to the secretariat of the Australia Papua New Guinea Business Council, on telephone + 61 7 3348 5142 or by e-mail at info@ apngbc.org.au or to the Business Council of Papua New Guinea on telephone + 675 323 8465, fax + 675 323 5162 or by e-mail at admin@bcpng.org. We look forward to hosting you at the 36th Australia Papua New Guinea Business Forum and Trade Expo on 24-26 May 2021, whether in Brisbane, or Online.
< From Page 21 connect via the online platform by sending messages to each other, as well as to exhibitors and speakers. The Forum will again feature a Trade Expo for Australian and Papua New Guinean companies wishing to use the opportunity to match their goods and services to clients and purchasers in each country, and to broaden their business relationship. An innovative development this year is that all the trade booths will be online, with a limited number of physical booths in Brisbane (as well as online) due to Covid restrictions. Booth exhibitors will be able to display their corporate logo, upload documents and short videos for visitors, include links to their own website, and chat one-on-one with delegates online, who can request meeting times with them via the online platform. This is a new, exciting, and pioneering way to do things, and we will endeavour to have answers for you immediately should you encounter any problems while using the online platform. Register early for this conference as in-person spots at each
www.pngbusinessnews.com • Issue 1 2021 25
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orking closely with customers in the mining and minerals processing sectors, Weir Minerals’ expert engineers have developed high-performance wear panels for use in all medium- to highwear applications. The new modular anti-abrasion panels are ideally suited for localised impact and wear points and assist in the suppression of noise and vibration. The modular anti-abrasion panels are manufactured from Linathane® polyurethane or Linard® HD60 rubber, materials engineered for superior abrasion, cut and impact resistance. The Linard® HD60 panels feature compression moulded natural rubber, with embedded high chromium white iron or ceramic wear resistant blocks for long wear life. The all-polyurethane Linathane® panels feature an orange base with a blue wear indicator layer to assist with maintenance scheduling. These modular panels are easy to fit and replace and use a self-sealing design to reduce both installation time and costs. Each panel measures 300mm x 300mm and is available in 30mm and 50mm thicknesses to ensure the best fit for
specific operating conditions. The interlocking plug design ensures easy alignment, and the secure fastening mechanism reduces the chance of fine material ingress between panels to promote even wear patterns. Each modular anti-abrasion panel solution can be customised to suit specific lining requirements, including availability of a range of arc studs attached to plugs and left and right corner panels. Product design features • Modular panels use a premium quality rubber compound providing superior performance in areas of abrasion, impact, and wear
• Linathane® is a premium quality polyurethane that has an anti-friction compound for use in areas where hang-ups and sticky ore occur • Hard wear surface for use in a variety of applications • Excellent noise and vibration dampening • Minimal downtime and loss of productivity • Quick and easy to fit and replace, utilising a simple panel and plug fixing mechanism • Supplied in convenient ‘kit’ form, complete with a range of arc studs attached to plugs to suit the application • A cost-effective and practical solution for relining • All panels can be used across a variety of applications to create a truly customised wear solution Product range • High Wear Areas - Linard® HD60 rubber panels with embedded high chromium white iron or ceramic wear resistant blocks. • Medium Wear Areas - Polyurethane Linathane® panels. • Low Wear Areas - Linard® HD60 rubber panels.
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26 www.pngbusinessnews.com • Issue 1 2021
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AGRICULTURE
Locals take on farming as a business By Jason Som Kaut
F
arming as a business is making a huge transformation in the Gumine district of Chimbu province, located in the lush and fertile Papua New Guinea Highlands. Local farmers are eagerly participating in a potato and bulb onion project that has picked up interest seeing more than ten model farms and three bulb onion nurseries established in the Gumine Local level government (LLG) area of the district as part of the projects trial stages. In March, local farmers delivered 7.7 tonnes (7,700 kg) of fresh potatoes graded and bagged for selling, both as seeds and for consumption. The harvest was delivered to the capital of Kundiawa, as residents looked on in awe at the truck loads of bagged potatoes, to the joy of Gumine MP Nick Kuman, who had helped initiate the project. An initial agreement was signed between Gumine district and the Fresh Produce Development Agency (FPDA) with a focus to farm potato and bulb onion as commercially significant crops for the district. FPDA wasted no time setting up an office and work progressed eagerly for all parties.
By June 2021, Gumine is expected to provide its first full harvest of an estimated ten tonnes of potato and bulb onions to Kundiawa town. A consistent supply to Kundiawa and other areas will provide a steady source of income for farming families involved in the project. Project Technical Team Leader David Kaupa said the first model farms were established only in Gumine LLG with selection of 10 model sites for seed potato production and distribution and three model nurseries for bulb onion.
He said a total of three tones (300kgs) of seed potato were distributed to the selected 10 model sites. “As per FPDA technical officers, production (of 7, 700 kg) was quite impressive at initial phase. The farmers have really seen and felt the positive impact potato has created in a very short period. All the people of Dirima-Yani want to engage in potato farming,” a delighted Kaupa said. He said for the very first time loads of potato left for Kundiawa on March 5, 2021, signifying a huge transformation in Gumine taking on farming as a business. Kaupa also revealed that bulb onion seedlings had been transplanted to the trial model sites and were growing with impressive results. Meanwhile, he said the other two LLGs of Digine and KumaiBomai will soon see the rollout of a trial phase of the project. Kaupa also said FPDA’s presence in Gumine district has positively impacted the mindsets of many young men and women, who now see farming as the way forward for Gumine. Original story by Wright Media
A family sits beside their bulb onions at a farm in Gumine district, Chimbu province.
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Potato model farmers in Gumine LLG of Gumine district with their harvest, part of the 7.7 tonnes of potato that the district produced and brought for the first time to Kundiawa town, the capital of Chimbu province. Chimbu, locally referred to and occasionally spelled Simbu, is a province in the Highlands Region of Papua New Guinea. It covers a land area of 6,112 km2. Picture by Ennio Kuble, Wright Media
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AGRICULTURE
Government intervention needed to improve coffee production By Jason Som Kaut
L
ACK of immediate government intervention to address a dramatic drop in coffee exports will have serious consequences for producers and the PNG economy that is very much dependent on it. This is according to the release of a discussion paper by the Papua New Guinea National Research Institute (PNGNRI) that uses data based on various factors affecting coffee production in the five leading coffee producers of the world compared to PNG. The study draws lessons and makes recommendations to guide policymakers, government, and Industry on strategies to improve production, quality and revenue for farmers, government, producers, and stakeholders. Titled “Strategies for Improving Coffee Production and Processing in Papua New Guinea: Lessons from the Top Five Coffee Producing Countries]”, it was researched and published by Carolyn A. Afolami and Eugene E. Ezebilo and released in March 2021. The data used in the discussion were analysed using descriptive statistics and a log-log Ordinary Least Squares (OLS) regression model. Of the top five coffee-producing countries, Brazil had the largest area of coffee field harvested and the highest quantity of coffee produced. This is larger than the area harvested in PNG by 54 times and quantity produced by 36 times. From 1998 to 2018, the coffee harvest area and quantity of coffee produced in PNG decreased by 33 percent and 28 percent, respectively. Most of the coffee trees in PNG have passed their economic productive age. Coffee growers, especially smallholders, lacked access to extension services, and they find it difficult to access coffee processing facilities. OLS results revealed that an annual increase in the coffee harvest area increases the quantity of coffee produced. Coffee production in Vietnam and PNG are the most sensitive to changes in Arabica and Robusta coffee prices. Extension services provided by the Coffee Industry Corporation (CIC) to PNG coffee farmers have not increased coffee production per hectare (yield). In Papua New Guinea, coffee has been the second leading agricultural commod-
ity, after oil palm (Department of Agriculture and Livestock [DAL], 2020). Coffee production provides opportunities for employment and foreign exchange earnings. Coffee contributed 27 percent of the total agricultural export from 2012 to 2017 and accounted for 6 percent of the Gross Domestic Product (GDP) within the same period. It contributes to multiple sectors of PNG’s economy, including transport, construction, manufacturing, retail and wholesale, insurance, and banking. The PNGNRI Discussion Paper (No. 184) cites a report by AECOM (2018) on the PNG coffee market study, that reported that exports had dropped to 934 60kg bags between 1998 and 2018 while coffee price on the international market has also been declining over time. The paper implies that, given that the two components of coffee revenue (output and price) to the producers is declining, revenue would decline over time and have serious consequences for everyone that depends on it. If the intention is to make PNG one of the top coffee-producing countries, strong political will’ is needed to invest in research, effective extension services, and upskilling of coffee growers in modern coffee production and processing techniques. This is apart from other factors like access to markets, which is now the focus of the new World Bank funded program PNG Agriculture Commercialization and Diversifica-
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tion (PACD) program that continues from the recently exited and successfully completed Public Private Agriculture Partnerships (PPAP) program. In collaboration with the World Bank, the Government of PNG (GoPNG) implemented the PPAP as an initiative to make growing cash crops, like coffee, more attractive to farmers. The Project focuses on improving performance in coffee production (DAL, 2020). This contributes to the GoPNG’s commitment to increase the contribution of cash crops — including coffee — to the country’s economy as highlighted in the Medium-Term Development Plan III (Department of National Planning and Monitoring, 2018). PNG’s coffee industry provides one of the highest potentials for growth and gains within the agricultural sector and has the potential to support the growth of the economy. However, the quantity and quality of coffee produced in PNG continue to decline, which threatens many households who depend on coffee for their livelihoods. The decline also adversely impacts government revenue from the agricultural sector. “Because coffee contributes immensely to PNG’s economy and the livelihoods of many households, it is pertinent we find strategies to address the problems associated with the production and processing of coffee in the country,” the paper said.
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AGRICULTURE
Commodity prices to remain low amid sluggish conditions By Jason Som Kaut
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OMMODITY prices are expected to remain low leading to large losses of exports for Papua New Guinea further adding to a dim global and domestic scenario amid a second wave of the COVID-19 pandemic. This is despite the fact, commodity prices for PNG’s exports recovered in the third quarter of 2020 in response to an acceleration of industry activity globally, particularly in China. However, energy prices were one-third lower in 2020 than in 2019. Metal prices fell slightly overall, although gold prices rose by a record 27 percent year on year. Agricultural prices also recorded a modest decline. This is according to the World Bank’s published sixth edition of PNG’s Economic Update series that was recently released titled “Dealing with a Triple Crisis.” Attributing sluggish global economic conditions owing to the second wave of the pandemic and associated lockdown measures as the main reason, the Update outlines some of the country’s economic outlook and risks. The PNGEU says “export
M
receipts from commodities will determine the external financing requirement, level of international reserves, and exchange rate developments.” It says despite falling commodity prices and an exceptionally uncertain global economic outlook, the current account balance is estimated to have recorded a surplus in 2020. However, the size of the surplus will be significantly smaller than in 2019. As in previous years, the current account surplus will be offset by a large deficit on the capital and financial account. In a pessimistic scenario, the second wave of the pandemic may lead to a more prolonged global recession with implications for Papua New Guinea’s export revenue. In addition, failure to resolve tensions surrounding mining projects may further depress export revenue and shake investor confidence in Papua New Guinea. These factors may lead to a balance of payments deficit, creating a requirement for additional external financing or a drawdown of reserves. Although currently above the level recommended by the IMF, foreign exchange reserves are under pressure. Against
this backdrop, the Kina is expected to continue its depreciating trend. However, noting authorities’ careful management of the exchange rate, the deprecation is likely to be modest. The Update also says that PNG’s medium-term macroeconomic outcomes remain subject to high downside risks that include external and domestic factors. For example, externally, supposedly economic growth rates are below expectations with PNG’s main trading partners (Australia, China, and Japan) and domestically, uncertain performance by the country’s major resource projects.
BPNG POOLS FINANCIALLY LITERATE TRAINERS
ore than 240, 000 people have been financially included in the modern financial banking system over the past few years. And more are expected to follow as various financial inclusion interventions spearheaded by the Bank of PNG, through the Centre for Excellence in Financial Inclusion (Cefi) continue to be rolled out. These were the shared sentiments during the signing of a Memorandum of Understanding (MoU) signifying the roll out of a pilot project to include Financial Education as a new core subject in the National Education curriculum. The MoU targets schools and teachers and will be piloted in 48 schools across PNG from the Elementary, Primary (Upper and Lower) and Secondary education levels. Another current intervention in Financial Education targeting rural farmers is the Market for Village Farmers (MVF) program that covers
six provinces in the Highlands, Morobe and East New Britain province. ‘We have a pool of talent to further drive the goal to get more Papua New Guineans financially included,’ Mr Bakani said further revealing that another 900 people had undergone Train the Trainer programs run by Cefi. “This will have a positive impact on the lives of our people. In 2014 BPNG commenced its ‘Young Minds Savings’ campaign that saw a singer visiting schools promoting FI through jingles and songs. Under the program over 200, 000 young savings accounts were established. Only accessible when they reached the age of 18. Under the program no bank fees were charged with the students accounts only bearing interests until they were able to access it when they turn 18. In 2018 Cefi undertook an essay
32 www.pngbusinessnews.com • Issue 1 2021
competition for schools about Financial Inclusion ensuring further feedback was attained and the program tweaked further eventually coming up with the current intent to include FI in the national education curriculum that has seen the signing of the current MoU between BPNG and the education department. Cefi has also partnered with banks and other financial institutions promoting their savings products through their financial inclusion program.
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Employee financial wellbeing linked to profitability
id you know that employee ‘money worries’ associated with poor financial wellbeing can negatively impact business profitability? Financial literacy training is a relatively easy and cost-effective solution to improving employee financial wellbeing and thus mitigating the negative effects of ‘financially stressed’ staff. Helping your employees access responsible loan products – some of which are now available in PNG via new and ethical personal lending start-ups – also has a role to play in their financial wellbeing. The effects of financial stress and poor financial wellbeing on employees can be as great as physical sickness. Many employees admit that they spend several hours each week dealing with financial issues while at work. A 2020 survey by PwC revealed ‘money worries’ to be the biggest cause of employee stress and that the stress is a major distraction at work. It is estimated that over 80 percent of the PNG workforce is experiencing some level of financial stress. How Does Poor Employee Financial Wellbeing Impact Business Profitability? Financial wellbeing is closely linked to financial stress. It is estimated that employee financial stress is costing Australian businesses $31.1 billion annually. Whilst specific data does not exist for PNG businesses, we estimate it to be high. We also know that financial stress takes a toll on employees’ health—both mentally and physically – as well as on business health. Employee financial stress contributes to increased absenteeism, lower quality work output, decreased productivity, increased staff turnover, and associated recruitment and training costs, as well as even workplace theft. Studies show that employee financial stress is costing businesses up to 19% of their payroll costs! A financially stressed workforce is therefore bad for the bottom line. What exactly is financial wellbeing? Financial Literacy Australia defines financial wellbeing as when you are: • able to meet expenses and have some money left over; • in control of your finances; and
• feeling financially secure, now and in the future. Financial literacy, that is, a personal’s ability to understand and effectively use various financial skills such as saving, budgeting, investing and responsible borrowing, underpins financial wellbeing. The business solution Financial literacy is key to reducing financial stress and improving financial wellbeing. Providing employees with financial literacy education is also part of being a socially responsible employer as well as an employer of choice. Significantly – and especially in PNG’s current economic climate – equipping staff with the right skills to understand and competently manage their personal finances will also impact positively on your bottom line. Solomon Islands business – financial literacy success story In neighbouring Solomon Islands, food manufacturing company SolTuna (one of the country’s largest employers) significantly cut staff absenteeism and consequently improved productivity, increased revenue, and cut costs largely via a financial literacy program. Prior to receiving financial literacy education many staff were taking days off work because they couldn’t adequately manage their pay to last them from one pay cycle to the next. Absentee staff were raising additional money in other ways such as selling produce at local markets to make ends meet. On
34 www.pngbusinessnews.com • Issue 1 2021
fortnightly paydays, many workers would head to the bank or the market instead of the workplace when their pay checks are deposited to do some much-needed shopping or pay off creditors. Overall, the program was considered a great success by not just SolTuna but also by its employees.
The Savi Moni loan product is available to PNG’s corporate sector via a streamlined online platform utilising payroll deductions.
Additional ways to improve employee financial wellbeing There are other ways in which employers can facilitate the financial wellbeing of their employees in addition to providing them with financial literacy education. • A good benefits package is a must. Performance incentives in the shape of bonuses, and clarity about pay bands are a great starting point. • Offer competitive salaries. This one might sound obvious— and expensive—but it is worth the effort. • Give employees time off (or flexible work schedules) to allow them to put their finances in order – be it visiting the bank to set up internet banking or to pay out a high interest loan. • Incorporate financial advisers into your broader wellness or employee assistance program. • Assist employees with their tax returns. • Even understanding payslips can be complex for some employees—helping employees to understand their payslips can reduce the burden of stress. • Encourage (and better still, facilitate) responsible borrow-
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Minerals | ESCO
COVER STORY
Powering Papua New Guinea, Empowering Communities
P
NG Biomass is Oil Search’s renewable energy and sustainable tree farming business. Subject to a final investment decision, PNG Biomass will be Oil Search’s first targeted investment into the energy transition. Establishing a renewable energy and sustainable development project in the Markham Valley in Morobe Province is a strategic and sustainable diversification of the Company’s energy portfolio. Designed with a two-fold purpose, PNG Biomass will be powering Papua New Guinea with domestic low-emission renewable energy and empowering communities by using an inclusive economic growth model.
PNG Biomass leverages the strengths and experience of Oil Search in delivering world-class infrastructure projects. By building capability in environmental, social, and economic responsible energy investments, Oil Search helps offset carbon emissions, develop attractive growth options at an acceptable risk level, and opens pathways to new global partnerships and financing opportunities for both Company and country. The value created by PNG Biomass is shared between landown-
ers, communities, women and youth, future generations, local and regional businesses, provincial and national government, and the Company itself. It is equally a sustainable investment for Oil Search and an investment in the people and prosperity of PNG. Powering Papua New Guinea As an integrated renewable energy project, PNG Biomass will offer biomass power, solar energy, and battery storage technology to generate clean, affordable, and reliable energy for the Ramu Grid. This project demonstrates how modular, incremental, diversified and dispatchable energy can pave the way for a new power paradigm that diversifies the country’s energy mix, makes power supply reliable, and helps PNG transition to renewable energy by 2050. Delivering 30 megawatt of electricity to the Ramu Grid, the biomass power plant is integrated with 16,000 hectares of dedicated, sustainable forestry plantations in the Markham Valley established and maintained by local landowners and communities. PNG Biomass will also oversee construction, operation and dispatch of an adjacent 11-megawatt peak solar farm and battery energy storage system, both grant-funded and owned by PNG Power. Together, the biomass power plant and solar farm will provide the Ramu grid with up to 40MW of renewable energy with the battery storage providing firming and grid stabilisation services. By using renewable energy there will be significant carbon emission reductions as generation from diesel
36 www.pngbusinessnews.com • Issue 1 2021
and heavy fuel oil (HFO) will be displaced. The battery storage technology will enable loadshifting of solar energy to the highest demand at peak hours and displace more diesel and HFO. As an integrated project there will be ancillary services benefits, including grid stabilization by providing baseload supply to the city of Lae – which represents about 90% of the Ramu Grid load. Sustainable development PNG Biomass delivers many benefits beyond electrification. The project is designed to deliver sustainable development closely aligned with PNG development priorities and the Sustainable Development Goals. When fully operational, PNG Biomass will have 500 ongoing local jobs and drive the creation of 2,000 indirect jobs across the
(Above) PNG Biomass will be powering Papua New Guinea with domestic low-emission renewable energy and empowering communities by using an inclusive economic growth model. (Left) More communities are participating and together creating a thriving native bee industry. (Below) PNG Biomass nursery at the Forest Research Institute in Lae.
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COVER STORY
< From Page 36 region. In 2020, some 300 full-time equivalent (FTE) jobs were created for locals in the Markham Valley. Most jobs (280 FTE) are contracted directly to community members and landowners through Community Business Groups. With communities and landowners at the core of the project, they can realise the full potential of sustainable rural inclusive economic growth opportunities created by PNG Biomass. Throughout the Markham Valley, close relationships with communities have been built since 2011. Landowners participate actively in the Project by offering select areas of their land for the establishment of sustainable forestry plantations. Landowners come together in community-owned business groups to provide PNG Biomass with labour and services to prepare, plant and maintain plantations. This way PNG Biomass creates significant and diverse income streams for local communities.
of around K3,000 from intercropping on areas smaller than half a hectare. With, at the time, around 400 families involved in small scale intercropping, each harvesting twice a year, they generated together an increase in household income of K2.4 million a year – a number that communities themselves claim to be conservative as they assert the overall intercropping income stream is substantially higher. With more land opening, more and more local farmers are taking up this agroforestry practice.
Women selling their intercropping harvest at the local market.
Local entrepreneurs Entrepreneurs are also making most of opportu-
Agroforestry PNG Biomass encourages and supports women and youth to take advantage of business opportunities to generate substantial benefits and income streams. The agroforestry practice commonly referred to by communities as “intercropping” is popular. Markham Valley communities receive support to help them get started with growing small-scale and short-rotation cash crops in between the rows of trees on plantation land. A team from PNG Biomass regularly conducts intercropping training and field demonstration, focused on ensuring communities understand the basic requirements of weeding, distancing crops from trees and plough lines. In early 2019, a baseline assessment was conducted on intercropping practices across the Markham Valley. The results included that best harvests and incomes are generated from pumpkins, melons, and cucumbers. Women reported single harvest incomes
nities arising; putting their forestry skills to work in the Markham Valley. Two former employees of PNG Biomass are leveraging the skills and experience they gained during their employment in the Company’s forestry division. Both have founded their own forestry businesses and are now suppliers of PNG Biomass, providing expert forestry services.
Traditional Markham clay pots are used as beehives.
Melons planted by landowners in between rows of young trees on PNG Biomass plantations
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A native stingless bee in the Markham Valley. www.pngbusinessnews.com • Issue 1 2021 37
FINANCE < From Page 34 ing – especially personal lending which in PNG, can attract interest rates of up to 50 percent per fortnight! Facilitating responsible borrowing Access to affordable credit is a right not available to most PNG employees. As such, and in combination with poor financial literacy, staff often turn to unethical ‘payday street lenders’. Street lenders typically charge extremely high interest rates (up to 1000 percent per annum) and often ‘over lend’ exacerbating and perpetuating unsustainable debt burdens. Many PNG businesses offer inhouse employee loans to mitigate the risks posed by unethical pay day lenders. However, the administrative burden of managing loan books can be high. An alternative is now available via personal lending start up – Savi Moni. Responsible lender offers financial literacy education Newcomer to the PNG Lending market, Savi Moni’s personal loan solution was developed to help corporate sector employees take control of their finances and
enjoy financial wellbeing whilst simultaneously reducing the negative business impact of financially stressed employees. “We want to give employers and employees a beneficial staff lending solution that incorporates financial literacy to help avoid future financial stress” says Founder, Nick Keane. Born and bred in PNG and with several in-country business experiences, Nick understands the problems that staff loans cause for businesses as well as the financial stress generated for many PNG households. He is passionate about creating an improved sustainable solution. Financial literacy education is a central component of the Savi Moni loan product, with a PNG specific formal ‘family money management’ workplace training, delivered by Australian Business Volunteers (ABV) available to interested employers. The training has been developed specifically to suit the PNG context and to help families strengthen skills in planning and saving for the future, as well as seeking advice about money and finance. Savi Moni’s financial literacy education offers a gender inclusive approach, encouraging men and women from family groups to
participate collaboratively. In addition, Savi Moni offers ‘Moni Savi’ - a range of free resources and tools on their website, targeting for both employers and employees to help improve financial literacy and reduce financial stress. Summary Improved financial literacy in combination with responsible borrowing contributes significantly to employee financial wellbeing and helps mitigate the negative business impacts of a financially stressed workforce. There is a clear business and social case for supporting employees’ financial wellbeing and for partnering with responsible personal lending services such as Savi Moni – which has financial literacy education firmly embedded in its loan products. To learn more: www. savimonipng.com.
< From Page 37 Community business group development PNG Biomass provides ongoing support to landowners to organize themselves in formal community business groups. The Zif Faring Business Group, representing the business interest of communities around Chivasing village, provides employment opportunities for over sixty landowners contracting them to PNG Biomass. In June 2020, Zif Faring Business Group was also awarded a contract for the provision of transport and delivery services to PNG Biomass. Management of the Zif Faring Business Group subsequently decided to purchase an Isuzu truck to dedicate to the transport services under the contract. Native bee program Switpela Bi Hani was established in 2018 by PNG Biomass as a native stingless bee community development program aimed at helping communities establish a local market for bee products in the Markham Valley. Community training was provided by PNG Biomass in 2018 and 2019, with community members driving expansion themselves in 2020 due to limited options during the COVID-19 pandemic for the continuation of
38 www.pngbusinessnews.com • Issue 1 2021
Frank Godfrey from Wompuai village in the Markham District of Morobe Province with native beehives in this beehive shelter (left photo) and with a clay pot hive, jars of honey and pollen, and a homemade OATH hive. training by foreign bee experts. Community uptake is extremely good, with hundreds of local hives established and new bee-hive materials trialled. More and more communities are participating and together creating a thriving native bee industry. The beekeepers are predominantly subsistence farmers, family units, women groups, and small-scale entrepreneurs – some are involved already with PNG Biomass as tree farmers while others are non-tree farmers.
TRUST CAPITAL TO PROTECT YOU
FINANCE
Kina Bank posts strong growth in 2020 despite COVID-19
D
espite a challenging year amid the global COVID-19 pandemic, the Kina Bank Group has recorded strong economic growth for the 12 months to December 31, 2020. This was the message from Greg Pawson, Managing Director and Chief Executive Officer of Kina Bank. “We have delivered planned business growth across all of our existing businesses this year, despite the challenges presented by COVID-19. We also achieved the integration benefits critical to the ANZ PNG acquisition. In parallel, we completed a number of strategic initiatives that were market firsts; we launched a suite of new digital products and services; and we achieved significant growth in revenue from our existing digital channels. Our disciplined approach has delivered compelling growth for the year.” Not only that, it has also achieved many milestones in PNG and the Pacific region and became the first bank in PNG to design and test an eKYC (electronic Know Your Customer) solution for digital account opening, with full biometric and digital document identification. It is now working with the regulator on a scalable in-market solution, according to a statement and market report released recently. Kina’s Funds Administration business continued to record growth in revenue. Profit increased
to PGK 8.3 million, representing 9-percent growth against the prior corresponding period. This is consistent with revenues arising from increased funds under administration and growth in member numbers compared to the prior year. Prudent management, innovation and strategic investments had seen significant progress made on a series of strategic initiatives that have successfully delivered growth for the business. Some of the achievements of the bank during the period include: • Announced the proposed acquisition of Westpac’s Pacific businesses in PNG and Fiji which is expected to complete by 30 September 2021 to become a larger scale regional bank. The acquisition is subject to regulatory approvals by the Bank of Papua New Guinea and the ICCC (Competition regulator). • Simplified the corporate structure and successfully conducted a 1:2 Non-Renounceable Rights Issue (ANREO) ensuring strong capital adequacy for the Bank. This will position the company for further growth while creating capacity to take advantage of acquisition and growth opportunities that may arise. • Delivered the planned revenues from new channel income of PGK 18.8 million from new channels successfully launched during the year.
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• Introduced a flagship new customer offering, Prime, that includes fee free Visa cards, the lowest fixed rate home loan in PNG history, and a dedicated relationship advisor for expert customer advice for all business customers. • Invested significantly in cards fraud risk and compliance systems and processes, resulting in a 95% reduction in fraud losses. New capabilities include a fraud monitoring module, 3D Secure, SMS email and WhatsApp alerts. • Became the first commercial bank in the Pacific to implement VISA transaction controls online, giving customers greater choice on how their cards are used, further reducing the risk of fraud. • Launched a market leading internet payment gateway that facilitates digital payments through multiple online channels for scheme cards and local bank cards issued by Kina Bank. The gateway enables payment partnerships direct to merchants or via intermediated e-commerce providers. Kina Bank also signed a digital partnership with a local fintech company to deliver e-government services. The Department of Lands and the Immigration and Citizenship Authority were onboarded in Q4. The partnership is a significant step forward in Kina’s ambition to
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COMPANIES
Ark 2-Storey Camp: Clients benefit from Ark’s innovative flat pack engineering, which results in greatly reduced freight costs, a minimal freight footprint and rapid assembly.
Innovative Flat Pack Engineering – 75% Freight Reduction
A
rk Pacific has cleverly engineered its flat pack buildings to guarantee a minimum freight footprint for its clients. Unlike competing products, six of Ark’s high quality flack pack units are equivalent to a single standard 20 foot shipping container when stacked together ready for transport. Not only are freight costs drastically reduced (by up to 75 percent) but so too are carbon emissions. Furthermore, the ease and speed with which the flat packed buildings can be transported to site is greatly improved. Land freight costs in particular, greatly add to the cost of building in PNG, especially in remote locations. Although Ark Pacific does not compete solely on price, the considerable freight savings associated with its flat pack systems enable it to be one of the lower cost building alternatives without compromising on quality. A recent mining client was able to transport all of the flat pack componentry required for five office blocks, one ablution block and one crib room on just one semi-trailer truck – competing modular products would have required up to eight trucks.
< From Page 40 drive digitally enabled government services. It also became the first bank in the Pacific to launch a Xero bankfeed API that will enable business customers to integrate their banking transaction data directly with the Xero platform, and opens up additional commercial partnership opportunities. In addition to doubling the number of merchant POS terminals in market, implemented a fully integrated solution between Pronto terminals and Kina POS machines,
In addition to reducing freight costs and therefore the overall cost of construction projects, building with Ark Pacific flat packs also help reduce a client’s environmental footprint. For example, one truck travelling between Lae and the Highlands obviously produces considerably less emissions than eight trucks. Moreover, fewer trucks have less negative impact on unsophisticated road infrastructure, including many of the unsealed and rough roads servicing mining sites. Popular with its resource clients, Ark Pacific products also have the advantage of quick assembly utilising local and unskilled workforces. A basic one-room accommodation unit can be installed in a single day. To date, all of the thousands of Ark modules across PNG have been installed by local content. Ark Pacific’s team of managers are available to oversee any construction project if required. With a 10 year presence in PNG, new resource client projects in 2021 include a Crusher Facility Office and Electrical & Instrumentation Building (both two-storey), as well as the project cited
with best in-market performance and superior reliability. The Financial Results for the year were: • Revenue up 53% on PCP to PGK 314.8 million • Non-interest income up 59% on PCP to PGK145.1 million • Return on equity 16.8% • NPAT up 25% on PCP to PGK 76.0 million • Net interest income up 48% on PCP to PGK 169.7m million • Capital adequacy at 23.8% • Net interest margin 7.5% • Earnings per share of AUD 11.7
42 www.pngbusinessnews.com • Issue 1 2021
cents or PGK 32.9 toea per share • Full year dividend AUD 10.0 cents or PGK 26.9 toea per share Net Interest Income increased by 48% to PGK 169.7 million compared to the prior corresponding period. This was achieved through growth in the existing loan book, incorporation of the ANZ loans and deposit portfolio and business acquisition, and lower interest expense (against total deposits) compared to the prior year. Overall gross loan book growth was up 16% against the corresponding prior period.
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OUR TEAM,
YOUR ADVANTAGE. People you know you can count on.
For over 75 years our people have been helping develop PNG and keep its industry moving. With over 300 staff on the ground, we are partnering with our customers to support their operations. Our team of experts is committed to providing genuine parts and service, trusted support and leading edge technology to help our customers get the job done. Phone +675 300 8300 for your nearest Business Centre.
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COMPANIES
< From Page 42 earlier. Ark Pacific is also halfway through constructing a 750 person mining camp (16 x two-storey buildings; 54 ensuited rooms per building). Initially having specialised in camp accommodation and office complexes for the resource sector, Ark Pacific has recently refined and expanded its residential housing product range. Durable and fit-for-purpose designs – ideal for community relocation projects as well as senior staff housing – are now available. Ark Pacific reports that it is not experiencing any supply chain difficulties due to COVID-19. Furthermore, given its reliance on local labour for installation (as opposed to expatriate personnel impacted by travel restrictions), clients have been able to commence their builds as soon as the flat packs arrive on site. To learn more about Ark Pacific, including how its flat pack systems can minimise your construction project’s freight footprint: www.arkpacific.net
Ark Module: Ark Pacific’s building systems are characterised by high-tech modular componentry built to PNG, Australian and New Zealand standards.
We pride ourselves on the the diversity of our range
Southern Queensland Steel is a reputable leading steel supplier. We do not believe steel is all we sell; we connect and collaborate with our clients to service requests, as we like to ensure that we fully satisfy entire requirements through the convenience of a one-stop shop. We have earnt our reputation through understanding the importance of good stock availability and variety in the range that we carry and, with our network support, as well as our Central Stock, we are confident we can fulfil all of your steel requirements. All our material is sourced to meet the relevant Australian Standards, through only the highest quality mills. We work closely with all of the mills we source our material through to ensure the highest quality material is supplied. Our ISO9001 means you can deal with us with confidence.
Our Steel Products Structural Steel
Universal Beams & Columns Welded Beams & Columns Taper Flange Beams Parallel Flange Channels Equal & Unequal Angles
Merchant Bar
Flat Bar Equal & Unequal Angle Parallel & Taper Flange Channels Rounds and Squares Duragal Products
Steel Pipe & RHS – Tubular Steel RHS – Rectangular Hollow Sections SHS – Square Hollow Sections Steel Pipe and Tube Line pipe Seamless ERW Line pipe, LSAW Line pipe Pipe Fittings
Steel Plates
Mild Steel Plate Grade 250 High Tensile Grade 350 Coil Plate (Truspec) Boiler Plate Q & T Plate Clad Plate
Steel Building Products Steel Mesh
Steel Fencing Purlins, Roofing & Walling Guard rail, Quadguard by Ingal
Mining Mesh
INDUSTRIES SERVICED: CONSTRUCTION – ENGINEERING - FABRICATION – MANUFACTURING – MINING – OIL & GAS – TRANSPORT
Southern Queensland Steel Pty Ltd 97 Coulson Street Wacol QLD 4076 Australia
44 www.pngbusinessnews.com • Issue 1 2021
Telephone: +61 7 3271 9111 Email: export@sqsteel.com.au
BUSINESS NEWS
How PNG companies can better handle procurement and supply in 2021
T
he role of the procurement team in PNG will evolve and change in 2021. These changes will come off the back of some unforeseen issues which may not have been as pertinent prior to the pandemic. Due to regulatory penalties, unprecedented disruption caused by COVID, an increase in raw materials, high demand in shipping and an increase to freight prices due to increased operational costs, many PNG based companies could face several complexities to procurement moving forward. Companies in PNG and around the world will need to adapt to a more proactive approach to ensure supply chain and procurement disruption is minimised.
How can this be done? To minimise disruption, procurement teams should adapt a proactive approach by implementing supplier diversity, various freight & logistics partners, better supply chain management and improved foresight into the many potential issues of a post pandemic era. As increases in freight are generally hard to avoid, procurement
will need to implement these strategies to save money elsewhere. The procurement and supply chain of businesses could very well see some challenging times ahead, all businesses should look at how effectively they can manage these issues to build a more resilient and agile supply chain. For more information visit: https://www.asiapac.biz
EMPLOYMENT IN PRIVATE SECTOR DROPS
A
ccording to the Bank of PNG’s (BPNG) jobs index, structured private sector employment fell by 5.5 per cent in the September quarter of 2020, relative to a 1.3 per cent growth in the June quarter of 2020. This was recently illustrated in BPNG’s quarterly economic bulletin for the September quarter. BPNG Governor Loi Bakani said that jobs dropped by 1.4 per cent except for the mineral industry. “By sector, the level of employment dropped in all the sectors except the financial/business and other services, and the wholesale sectors,” he said. “By region, the level of employment fell in the Highlands, Mamose (excluding Morobe) and Southern, excluding National Capital District, while it increased in Morobe. The level of employment remained unchanged in the New Guinea Islands,” Bakani said. “Over the year to September 2020, the total level of employment fell by 7.0 per cent, compared to an increase of 2.1 per cent in the corresponding period of 2019. Excluding the mineral sector, the level of employment fell by 2.7 per cent over the year to September 2020, compared to a decline of 0.4 per cent in the corresponding period of 2019,” he added. Domestic economic activity contracted and stayed weak throughout the year to the last September quarter, according to economic measures available to BPNG, owing primarily to the negative effects of the global Covid-19 pandemic. www.pngbusinessnews.com • Issue 1 2021 45
COMPANIES
I
Atlas Steel introduces modular houses
t is a big year for Atlas Steel PNG, a local company, who is introducing Modular Houses – a new product to the PNG market during the second quarter of 2021. Business Development Manager Aliraza Agai said: ‘Modular Houses are a new addition to our Building Division which is already the largest supplier of steel buildings across PNG for the residential, educational, commercial & industrial sectors’. The main features of the Atlas Modular Houses are:
1. Predictable Cost A controlled and fixed pricing method is adopted at the beginning of the construction process allowing you to effectively know exactly what you are getting for your money. 2. Assured Time Frame The average time from commencement of works to handover is 10 weeks, which consists of six weeks factory construction and four weeks on-site completion. The benefit of modular construction is the ability to commence works on both the prefabricated modules in the factory and the footings and landscaping components on site at the same time. 3. Best Design & Construction Capabilities Our experienced in-house design, engineering & construction team allow us to come up with creative and smart solutions to complex architectural forms and functional requirements. All structural elements of your house are designed using in-house design software and manufactured in our state-of-the-art factory using Computer Numerical Controlled (CNC) technology by our team of dedicated professionals. 4. Top Quality Control In Modular construction, majority of the works are carried out in a controlled factory environment. Our designers, engineers and tradespeople are at site, at all time, which results in a focused attention to detail and quality control throughout the entire construction process of your building. As outlined by Ali, it’s a simple 5-step process to building your dream Modular home. Step 1: Consultation
This involves a meeting with our team to discuss the feasibility of the modular system for your home. Our creative and technical team will assess your requirements, your site and your needs related to the basic parameters as well as your selection of finishes, fixtures & fittings to form a design brief. Step 2: Design & Costing Based on your requirements, designs and costings are prepared for your review and feedback. Once your comments are incorporated, Atlas Steel PNG draws out final drawings, designs and prices for your acceptance - which then culminates into a detailed contract. Step 3: Planning Approvals The designs and drawings are then submitted to our panel of Professional Engineers for their approvals after which the documents and reports are submitted to the Building Board for necessary approvals. Step 4: Factory Construction Factory construction involves manufacturing and assembly of all structural components of the house along with fit-outs to the required stage of completion before transport. This includes our quality FRAMECAD steel framing system, external & internal cladding both of which are manufactured using Galvanized & COLORBOND steel coils from New Zealand Steel. The interiors comprise of quality kitch-
46 www.pngbusinessnews.com • Issue 1 2021
ens, bathrooms, floor coverings, electrical, plumbing, joinery and all painting works. While these works progress in the factory, foundation and earth works also commence at site to receive the modular house within the stipulated time frame. Step 5: Delivery & Site works This involves craning & delivery of the pre-fabricated modules to the site along-with service connections for electrical and plumbing systems. Once the house is ready and all operational checks have been done, a formal handover of the house takes place. “With Modular Homes added to our buildings division, we expect to get even busier this year. Classrooms are the next category that we plan to roll out and keeping in mind the demand that these Modular buildings are anticipated to create, we are already looking into expanding our fabrication and assembly facilities and recruiting more staff” Ali said. “The biggest challenge that a buyer faces today is to choose the right product. The market is flooded with poor quality, substandard building components. At the same time there is also a rise in imports of house and building structures from overseas. When a buyer takes delivery of an imported building, first of all, he does not get a share of the savings because the suppliers pocket all the savings. Secondly, because of poor quality control, most of the
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OK TEDI HAS CONTRIBUTED MORE THAN
PGK65 BILLION
TO PAPUA NEW GUINEA’S ECONOMY.
In the last 36 years since operations began in 1984, Ok Tedi Mining Ltd has contributed more than PGK65 Billion to Papua New Guinea’s economy, and has further supported Western Province development through Tax Credit Scheme and other infrastructure projects such as health centres, school classrooms, roads, airstrips, jetties, water supply and communication systems. We also contribute significantly to the Province, and Papua New Guinea through royalties, compensation payments, direct and indirect employment, training, and business opportunities.
As a majority State-owned entity, and proudly the only 100% PNG-owned mining company, we are committed to helping contribute to Western Province and Papua New Guinea’s development.
OUR MINE • OUR PRIDE • OUR FUTURE
OKTEDI.COM
COMPANIES
M
Safety of women is a success to business
ore and more women are venturing into fields predominantly held by men as Papua New Guinea’s formal economy grows, hence increasing the need to widen the safety lens and address aspects of women’s safety that have typically received scant attention. The Gender Smart Safety (GSS) training program offered by the Business Coalition for Women (BCFW) is an innovative way of exploring how safety impacts on women and men differently and has helped several PNG businesses like New Britain Palm Oil, St Barbara, Oil Search, and Pacific Towing to improve the safety of their female employees.
Pacific Towing leads gender safety in marine services PNG-owned marine service business Pacific Towing prides itself as a business with a gender-diversified workforce, employing women in an industry that is notoriously male-dominated with gender smart safety at the heart of its operations. In the first quarter of 2019, Pacific Towing’s first GSS audit, measured the physical, emotional, and occupational safety of female staff. Key findings and recommendations from the audit enabled the company to appropriately respond to ensuring safety of women in the workplace were addressed through implementation of the following activities: • The appointment of the Safety Manager as the GSS Taskforce Lead. • The HR Manager attending a train-thetrainer on “Sexual Harassment and Work” to support awareness on policy implementation of zero tolerance to sexual harassment and ensuring new staff are informed during induction • Taskforce team refresher on the “Introduction to GSS” and frequent practise of the
< From Page 46 buildings begin to rust and leak causing both emotional and financial stress to the buyer. Thirdly, and most importantly, how will we be able to create a self-sufficient and sustainable domestic economy if we encourage such imports. Buying Atlas Steel PNG quality buildings locally helps keep the PNG Kina in PNG and provides work to our local work-force” Ali added. Having been in the PNG building and construction market for decades, Atlas Steel PNG understands the local needs and has spent time and resources to come up with suitable layouts and
audit tools • Toolbox talk with senior team leaders on “Creating Safe Spaces for Women in the Workforce” • Upgrading facility and signage to meet the physical, emotional, and occupational safety of female employees The GSS Policy addresses risks and safety concerns for women in their workplaces and assists businesses to: • Identify and respond to specific risks that impact women in their workplaces; • Reduce workplace injuries for women and related costs; • Fulfil the duty of care for all its employees; • Improve employee health, safety, and wellbeing; • Improve women’s participation in the workplace and capacity to contribute to the
designs that amalgamate quality and style with affordable pricing. In addition to standard layouts Atlas Steel PNG also offer tailored solutions to clients, to build their dream homes and building structures. According to Ali, quality and cost continue to be the primary drivers across all divisions in Atlas Steel PNG, including the new Modular systems. In his final remarks Ali said: “Atlas Steel PNG is a local company and we are doing our bit to contribute to the local economy. Likewise, I encourage the Public and Private sectors
48 www.pngbusinessnews.com • Issue 1 2021
Members of the Pacific Towing Gender Smart Safety Task force team certified following the GSS Training. “GSS is not an expensive or onerous program to roll out and then sustain. The audit tools are tailor made for PNG workforces, so it was easy enough for our staff to master them and for our trainers to instruct staff at our other operations on how to utilise them,” said CEO Neil Papenfus.
to also emphasize on using PNG Made products to support domestic businesses and strengthen the local economy’.
To Page 50 >
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COMPANIES
Kina Bank supports KTF education program for second year
K
ina Bank has pledged support for the second consecutive year to the FODE education program administered by the Kokoda Track Foundation at the Motu Koita FODE centre in Port Moresby. The bank is funding the FODE program and providing mentoring by bank staff to students enrolled at the centre. The one-on-one mentoring program offers students the opportunity to connect with young and seasoned professionals across the bank who provide coaching, and help with their studies, assessments and to prepare for exams. Building on the success of last year, students have direct personal access to a mentor who can guide them on their path to success and help them reach
their goals. “Our partnership with Kina Bank is that in every sense of the word. From vital financial support, to their innovative volunteer mentoring program and all of the ‘small’ ways they assist our work in between, we are proud to partner with Kina Bank and are delighted to continue developing our partnership this year,” said KTF CEO, Dr Genevieve Nelson. “In these challenging times, we are poised to deliver a full year of learning to our students, committed to the safety of our students and staff. We are fortunate to have an incredible partner like Kina Bank by our side on this education journey.” Kokoda Track Foundation reported to have enrolled 150, an increase in numbers from 2020.
< From Page 48 business; • Demonstrate corporate social responsibility commitments; • Meet employment equity responsibilities, commitments; and • Stand out as an employer of choice. Business value of implementing a GSS Policy • Helps businesses develop a supportive and non-judgemental workplace in which women can discuss issues and concerns affecting their safety at work; • Guide an employer’s responses to ensure continuous improvement in women’s safety at work;
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“Continuing the partnership with the Foundation for Motu Koita FODE was an easy decision for us, building further on the success of the previous year and to see through some of the students in grades 10 and 11 mentored last year,” said Greg Pawson Kina Bank Chief Executive Officer. “The bank is committed to helping create the workforce of the future by supporting the learning and development of young people in Papua New Guinea. Initiatives such as the Motu Koita FODE program gives a second chance to young people to attain high school certification and progress to higher education and eventually transition into employment with skills and qualifications. At Kina Bank we’re committed to supporting our communities.”
• Ensure a sustained response to women’s safety at work; • Ensure women are empowered through safety at work; and • Facilitate a safe workplace for all employees. “Practicing GSS is good for business. When female staff spend extra worktime strategizing about their safety, this lowers their productivity levels. Ongoing safety concern for female staff has a negative domino-effect on their health, attendance and performance resulting in high staff turnover rates, which means businesses must pay to recruit and train new employees. The level of safety a business provides for women is a measure of its commitment to gender equality,” said BCFW Executive Director Evonne Kennedy.
Westpac Banking Corporation ABN 33 007 457 141. The liability of its members is limited. Westpac is represented in Papua New Guinea by Westpac Bank - PNG - Limited.
COMPANIES
Ok Tedi welcomes new trainees for internship programs
O
K Tedi Mining Ltd (OTML) has recruited 40 new trainees for its 2021 internship programs. Sixteen intakes are with the Graduate Development Scheme for a duration of two years, while 24 are trade graduates who will undergo a four-year apprenticeship training. OTML Managing Director and CEO, Musje Werror said, “Ok Tedi’s training programs are second to none and aimed at developing trainees to reach their full potential in their professional career paths and personal development.” He said despite the delay in the recruitment drive due to the onset of the pandemic, all trainees are onsite and excited to be part of the Ok Tedi family. “The Training Centre is fully equipped to deliver high quality training programs for both apprentices, graduates and employees which we have been doing for the past 32 years,” Mr Werror said. Developing workforce capabilities is one of the three key pillars of OTML’s approach to develop a high performing integrated team. He encouraged the new intakes
to use the opportunity to start a new life professionally and personally. Mr Werror said, “In life you will be given opportunities, but how you approach these opportunities will determine where you end up.” Thirty years ago, Mr Werror joined Ok Tedi as a fresh graduate out of the University of Papua New Guinea and today he is welcoming the new graduate trainees into OTML in his capacity as the managing director of the company. Referring to Mr Werror’s story with OTML, Dauba Dauba, a graduate geologist from the University of Papua New Guinea said, “This in
52 www.pngbusinessnews.com • Issue 1 2021
itself is an inspirational story for us.” Since the inception of the programs, 561 graduates and 1,194 tradesmen and women have successfully graduated from their respective programs. Ok Tedi also provides the Preferred Area Development Training which is tailored for the locals in the Mine Preferred Areas. Manager, Organisational Development and Training, James Munro said, “We look forward to training another great batch of graduates and I encourage each and every one of you to work hard to succeed in this program.”
A new beginning dawns for these young professionals.
COMPANIES
N
Pacific Towing passes international safety audit
early 5 years LTI free and with a record of continuously improving and fine tuning its safety systems, Pacific Towing (PacTow) recently passed its International Safety Management (ISM) Code audit. The voluntary audit was conducted in accord with the International Maritime Organisation (IMO), the United Nations agency specialising in maritime and shipping affairs. The aim of the audit was to assess the effectiveness of PacTow’s Safety Management System regarding its vessels as well as its shore-based support. The audit was conducted in accordance with a variety of IMO standards and international industry best practice. HSSEQ Manager and Designated Person Ashore (DPA) Richard Hayka reports that the audit, which was conducted by HSE New Zealand, incorporated not only the ISM Code but also the International Convention for the Prevention of Pollution from Ships (MARPOL), the International Convention for the Safety of Life at Sea (SOLAS) and the International Ship and Port Facility Security (ISPS) Code. The audit was conducted online due to COVID-19 travel restrictions. Importantly, Hayka confirmed that the audit verified PacTow’s Safety Management System followed all mandatory rules and regulations. This is in line with the company’s expectation that it will be certified for ISO standards 9001:2015, 14001:2015 and 45001:2018 by midyear.
The audit also found that all annual vessel surveys were up to date and in accord with the National Maritime Safety Authority’s (NMSA) requirements. Furthermore, statutory certificates reviewed as part of the internal audit were found to be valid, and company records verified that all policies were properly implemented. Adding to the safety credentials of PacTow, is the recent employment of an Operations Manager with considerable international oil and gas sector
experience, including emergency response – Captain Marcelo Santini. Together, Hayka and Santini are getting ready for another audit; they are preparing PacTow’s dedicated tug base at Motukea, Port Moresby for an International Ship and Port Facility Security (ISPS) gap audit. Hayka says that he expects certification for this next audit to be achieved by the end of Q3 this year. To learn more about Pacific Towing and its safety credentials: www.pacifictowingmarineservices.com
HSSEQ Manager and DPA, Richard Hayka, says: “PacTow’s reputation for ‘excellence and reliability’ in marine services is underpinned by its safety systems and performance, enabling it to secure work with significant clients such as the Australian Navy.” (As indicated by PacTow’s recent berthing of the Australian naval supply vessel HMAS Schoules.)
KINA PLANS NEW NAME FOR WESTPAC UNIT
I
f the planned takeover of Westpac’s Pacific company is authorised, Kina Bank said the new bank would have a new name and would be independent of Kina to increase banking sector competitiveness and consumer preference. Kina’s plan, according to Chief Executive Officer Greg Pawson, is to establish a new-branded bank for the nation that is independent and different from Kina Bank, disrupting the banking sector in a positive way. “Our intention is to maintain the independent commercial banking licence of Westpac PNG,” Pawson
said in a statement. “The newlybranded bank will have a new name and be separate from Kina Bank – and it will be governed by an independent PNG-based board of directors.” Pawson said the new bank would compete directly and vigorously with Bank South Pacific, ANZ and Kina Bank. It will be a great outcome for customers from a service and product perspective. Creating a new brand means there would be no lessening of competition and no prospect of a duopoly or market dominance.” Through Kina Securities, everyone in PNG will be able to invest
54 www.pngbusinessnews.com • Issue 1 2021
and share in the ownership of the company, according to Pawson. “The proposed acquisition of Westpac’s Pacific businesses will also pave the way for local investors to participate in the ownership of it through an equity raising,” he said. “Anyone can buy shares in the newly-branded bank through Kina Securities Limited. It’s a great opportunity for anyone in Papua New Guinea who wants to be part of Kina’s growth and success.” Kina completed an equity raise in November to increase the bank’s capital base and allow it to undertake the acquisition of Westpac’s Pacific businesses.
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BUSINESS NEWS
Ok Tedi commits PGK20 million to help PNG curb escalating COVID-19 cases
O
k Tedi Mining Limited (OTML) has committed PGK 20 million to help Papua New Guinea curb the escalating COVID-19 cases in the country. Kedi Ilimbit, OTML General Manager Community and Operations Support Acting Managing Director and Chief Executive Officer, made the announcement in March 2021, saying OTML’s commitment demonstrates the Company’s seriousness in addressing PNG’s escalating COVID-19 situation. Mr Ilimbit said PGK10 million will be given to the Port Moresby General Hospital and other agencies as determined by the National Government while the other PGK10 million will be used for the procurement, distribution and roll-out of vaccine in the Western Province, with priority given to the OTML workforce, contractors, and residents. “We will be working closely
with the Sustainable Development Program (SDP) and the Western Province Health Authority to implement the COVID-19 vaccine roll-out plan in the Western Province,” Mr Ilimbit said. “Ok Tedi is fully committed to take the lead and join forces
with the Government, and other relevant agencies to address this pandemic that is affecting all of us. Our commitment demonstrates the same duty of care we have for our employees, to be extended to other Papua New Guineans, including our people of Western Province,” he said.
In 2020, OTML assisted the Western Provincial Health Authority to conduct COVID-19 testing in Western Province, part of this exercise also covered some of the mine landowner villages in the North Fly.
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AGRICULTURE
Governments struggle to provide coffee cultivation facilities
G
overnments in some coffeeproducing countries have struggled to provide facilities that encourage the cultivation and processing of high-quality coffee. “Strategies for improving coffee production and processing in Papua New Guinea: Lessons from the top five coffee-producing countries,” a report by the PNG National Research Institute (NRI), highlighted the country’s coffee production and processing and proposed development strategies based on lessons learned from the top five coffee-producing countries in the world. Brazil, Vietnam, Colombia, Indonesia, Ethiopia, and Papua New Guinea were among the six coffee-producing countries studied across four continents. The study’s abstract can be found below. Introduction Coffee is the second most important agricultural crop in Papua New Guinea (PNG), after oil palm. Coffee processing produced jobs as well as foreign currency earnings. From 2012 to 2017, coffee accounted for 27% of total agricultural exports and 6% of the country’s gross domestic product (GDP). It helped PNG’s economy in a variety of ways, including transportation, construction, manufacturing,
retail and wholesale, insurance, and banking. Arabica is a coffee species that is widely grown in PNG, mostly in the Highlands between 700 and 2,050 meters above sea level. Robusta is grown in coastal areas of PNG at elevations of up to 550 meters above sea level. PNG produces high-quality, fine-flavour Arabica coffee, which is highly sought after by coffee drinkers. Coffee production in PNG, on the other hand, seems to be decreasing. Between 1998 and 2018, according to a survey by AECOM (2018) on PNG coffee market research, exports fell to 934 60kg bags. In the foreign market, the price of coffee has also been falling over time. The implication is that, since the two components of coffee revenue (output and price) to producers are decreasing, the revenue would decline over time, resulting in significant consequences for the producers and the PNG economy. Results of study In Papua New Guinea, the annual area of coffee fields cultivated ranges from 41,000 hectares in 2002 to 87,000 hectares in 1999. In PNG, the area of coffee fields cultivated decreased by 33% from 81,000 hectares in 1998 to 54,000 hectares in 2018.
60 www.pngbusinessnews.com • Issue 1 2021
When compared to the smallest area of coffee field harvest among the top five nations, PNG’s largest harvested area (87,000 hectares) is 71% less than the smallest harvested area (220,000 hectares). The amount of coffee beans processed has decreased by 28% from 81,000 tonnes in 1998 to 58,000 tonnes in 2018. It’s worth noting that there was no data available for 2008. Over the course of the research, PNG’s annual coffee production was lower than that of the top five coffee-producing countries. Vietnam had the most coffee harvested per hectare of the top five coffee-producing countries. It jumped from 1,875 kg/ha in 1998 to 2,612 kg/ha in 2018, a 39 percent rise. Brazil harvested 816 kilograms per hectare in 1998 and 1,906 kilograms per hectare in 2018, a 134 per cent rise. Findings from a literature review on key challenges to coffee production and processing in Papua New Guinea The following are some of the obstacles to coffee production and processing in PNG: • INADEQUATE access to basic infrastructure and facilities – Smallholder farmers, especially those in rural areas, struggle to find facilities for coffee milling and storage. There were no
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AGRICULTURE < From Page 60 decent roads for transporting agricultural supplies and goods to and from their coffee fields. • FARM management activities – Most coffee trees have reached the end of their economic sustainable life cycle, resulting in a decrease in crop yield. Producers postpone or fail to perform required coffee husbandry activities such as daily pruning and the planting of shade trees. • REDUCED YIELD AND Uneven PRODUCT QUALITY – The quality of coffee produced in PNG is deteriorating. • INADEQUATE extension services – Coffee farmers, especially smallholders, need education on modern coffee production methods. They, on the other hand, often find it impossible to obtain services from extension agents. • TECHNOLOGY – Modern technology can help coffee farmers increase productivity and increase the appeal of their commodity. Coffee farmers in PNG, on the other hand, often lack modern technologies, which limits their ability to reach their full potential in the coffee industry. • CHANGE IN CROPPING Trend – Due to a drop in coffee market prices or problems with access to coffee processing facilities, some coffee farmers turn all or part of their coffee fields to other more cost-effective crops. The turn to other crops may also
be due to labour shortages for essential farm tasks including pruning coffee trees and picking coffee beans. • PESTS and diseases – Other threats threatening coffee production include the coffee berry borer, coffee leaf rust, coffee green scale, and pink disease (DAL, 2020). • UNFAVORABLE MARKET PRICES – The price paid to smallholder coffee farmers is often less than the rate paid to exporters. Smallholders are also discouraged from paying attention to required farm activities, which influences coffee productivity. • FINANCIAL ACCESS – Certain coffee farmers choose to grow their farm or buy coffee processing equipment. They, on the other hand, frequently have difficulty obtaining loans from commercial banks. • ACCESS TO LAND FOR COMMERCIAL COFFEE PRODUCTION – A wide area of land is required for commercial coffee production to be productive, particularly in terms of economies of scale. Broad tracts of land with proper names, on the other hand, are often difficult to navigate. This is because the state-owned property with proper titles is almost depleted. Communal-owned property, which accounts for nearly 97 per cent of total land in PNG, lacks proper titles; and • SECURITY issues – Theft of coffee goods, particularly in rural areas, is a major concern
for farmers and raises production costs and losses. Discussion The results of this study revealed that PNG has the potential to become one of the world’s leading coffee producers. The country’s climatic and environmental conditions are ideal for growing a variety of coffee varieties, giving it an advantage over some of the world’s top coffee producers. This may explain why, according to the study, PNG had a higher average coffee yield per hectare than all the top five coffee-producing countries except Vietnam. However, the region of cultivated coffee fields and the quantity of coffee produced by PNG have remained lower than those of the other top five coffee-producing countries studied in this report. The PPAP, which is being implemented by the government with the support of the World Bank, can increase PNG’s coffee production and make the country more competitive in the coffee industry. However, the PPAP benefits only certain coffee farmers, making it impossible to achieve the desired rise in coffee demand. More robust and reliable monitoring and evaluation processes are needed for the PPAP to contribute more meaningfully to the coffee market. The project should place a greater emphasis on coffee tree replanting and plantation regeneration. To increase overall coffee production in PNG, all coffee growers should have access to the PPAP (for example, through an all-inclusion program).
www.pngbusinessnews.com • Issue 1 2021 61
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Situated in the heart of Port Moresby is Crown Hotel Port Moresby with stunning panoramic views of the Coral seas and the Fairfax harbour. Crown Hotel is perfect for either business or leisure with 151 rooms, 2 restaurants, 2 bars and conference facility that caters up to 300. The fragrance of fresh flowers breezes through our modern Lobby, where you can browse artefacts drawn from Papua New Guinea’s diverse cultures. Our Front Desk staffs are waiting to take your bags to your room or suite while you gaze at the ocean from Heritage bar or soak in the outdoor pool. Rapala restaurant’s French fusion organic restaurant is complemented by a fine wine list while our casual Pondo Tavern serves comfort food on its deck. Exercise when you want in our 24-hour Fitness Centre or get to work using wireless Internet in our Business Centre. We’ll help you dive the reefs off Loloata Island and our sumptuous beds are a wellearned reward after hiking the Kokoda Trail. Stay at Crown Hotel Port Moresby and, whether you’re with us for 2 nights or 2 months, you’ll feel safe, secure and right at home.
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MINING
F
Kingston Resource now owns 100% of Misima Gold Project
ollowing the completion of all terms with former joint venture partner Pan Pacific Copper to buy its 19% stake in the Misima gold project in Milne Bay, Kingston Resources Ltd now holds a 100% interest in the project. Kingston has received the final tranche of the overall consideration of AU$2 million (K4.31 million) since receiving all regulatory approvals from PNG (K5.23mil). Kingston now has 100 per cent control of the plant, according to an announcement made last week on the Australian stock exchange. The merger agreement was first revealed on November 12, 2019, and then revised on June 24, 2019. According to Kingston managing director Andrew Corbett, this was a fantastic result for shareholders and a significant step forward for the firm on its journey to becoming a new gold producer in Asia-Pacific. “The completion of this transac-
tion provides Kingston with 100 per cent ownership of our flagship asset, which is rapidly progressing towards development,” he said. “Since we first acquired an initial 49 per cent interest in the Misima gold project back in late 2017, we delivered a number of key project milestones that culminated in the delivery of a highly positive pre-feasibility study (PFS) for Misima in 2020. “This PFS clearly demonstrated that Misima is a largescale, long-life, low-cost gold project that is set to deliver significant value and opportunities for all stakeholders. “We have grown the initial resource base from 2.3Moz (million ounces) to 3.6Moz, delivered a maiden 1.35Moz ore reserve, and we expect both our resources and reserves to continue to grow through ongoing in-fill drilling and
testing of exploration targets.” He added, “Completion of this acquisition provides Kingston with a streamlined and simplified ownership structure, providing a strong platform and added flexibility to continue checking off the necessary milestones to re-start gold production on Misima Island.”
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64 www.pngbusinessnews.com • Issue 1 2021
MINING
K92 Mining: Record production aids 56% revenue hike at Kainantu
K
92 Mining recently revealed that its Kainantu gold mine in Papua New Guinea’s Eastern Highlands province produced a record annual goldequivalent output of 98,872 oz. The gold equivalent volume is 95,109 oz of gold, 1,853,078 lbs of copper, and 36,067 oz of silver, reflecting a 20 per cent growth in AuEq from the previous year. Cash costs of US$651/oz gold and AISC of US$782/oz gold were obtained by the company. The firm reported that its annual revenue of US$159.1 million were up 56 per cent from the previous year. EBITDA was US$79.6 million, or US$0.37 per share, and operating cash flow was US$76.5 million, or US$0.35 per share. The company’s net income was $42.0 million, or $0.19 per share. In addition, following the lifting of the State of Emergency in June 2020, K92 successfully commissioned Stage 2 Plant Extension, doubling throughput capacity to 400,000 tonnes per year and ongoing construction of the twin incline. K92 Mining is involved in the extraction of gold, copper, and silver from the Kora deposit at the Kainantu gold mine in Papua New Guinea’s Eastern Highlands province, as well as the discovery and construction of mineral resources near the mine. In February 2018, the company announced commer-
cial production from Kainantu and is in a good financial position. John Lewins, K92 Chief Executive Officer and Director stated, “2020 represented another transformational year for K92. “In terms of operations, Kainantu delivered record throughput, production and development, and finished the year particularly strong, with multiple quarterly records achieved in the fourth quarter. “In the third quarter, K92 achieved two major growth milestones: the completion of the Stage 2 Plant Expansion commissioning, and; the Stage 3 Expansion PEA study. The Stage 2 Plant Expansion, has already delivered a notable step-change in terms of the capabilities of the operation, doubling throughput capacity from 200,000 tpa (~550 tpd) to 400,000 tpa (~1,100 tpd). “The Stage 3 Expansion PEA has outlined a Tier 1 Asset, expanding to 1 mtpa throughput with run-rate production of ~318kozpa AuEq, LOM average AISC of $362/oz Au and capital costs funded from mine cash flow at $1,500/oz.” He added, “On exploration, Kainantu doubled the number of drill rigs to 10, providing a significant boost to not only the rate of drilling but our capacity to drill multiple targets concurrently. In the second half of the year, this
66 www.pngbusinessnews.com • Issue 1 2021
resulted in high-grade mineralization recorded at both the underexplored Karempe and Judd vein systems. “The results from Judd are particularly encouraging with JDD0006 recording 7.25 m at 256.09 g/t Au, 113 g/t Ag and 0.42 % Cu (258.01 g/t AuEq, 5.30m true width) on the J1 vein (see November 9, 2020 press release), representing one of the highest-grade intersections drilled by K92. “Importantly, underground development has supported the Judd drilling results, with the latest 65-metre development extension on the Judd 1235 Level recording an average 3.8 metres vein thickness at 18.70 g/t AuEq (17.13 g/t Au, 0.82% Cu and 37 g/t Ag) (see January 26, 2021 press release). “Exploration results have increased our conviction for a higher throughput rate for the Stage 3 Expansion Definitive Feasibility Study and resulted in more drill rigs being added through 2021. Lastly, I would like to highlight that this transformational year was achieved in one of the most challenging environments globally due to the COVID-19 pandemic. “The dedication and resourcefulness of our workforce have been exemplary, and the support of the government has also been a major factor in our success.”
MINING OIL AND GAS
T A
Travel ban will not affectasset, Lihir PNG LNG is a world-class development, saysLtd. Newcrest says Santos
heustralian Australian Government’s natural gas develban on incoming and outgoing oper Santos Ltd said that travel between the PNG LNGthe is aneighbourworlding countries expected to have class low-costis asset delivering no effect on Newcrest Mining’s Lihir above nameplate productivity. gold activity intoPapua Guinea According chief New operations (PNG). officer David Banks, opportunioperation undergoing tiesThe forLihir expansion caniscome in athe scheduled maintenance shutdown future. “One core asset that and is steadily is operated byresuming others is operations. the PNG Newcrest stated thatMobil, it wasthe LNG,” he said. “Exxon working thejob Australian operator,closely does awith great in terms Government to prevent any possible of filling the plant. impacts “The from plantthe hasban. been tracking at is currently no nameplate anticipat30 “There per cent better than ed interruption to gold capacity through veryproduction low-cost oparising as improvement a result of theand travel erational bottlesuspension,” necking thatNewcrest has been stated. completed. A “tiny number ofcost COVID-19 “The production of US$4.85 cases” has(per beenburial recorded (K17)/boe of oilamong equivthe gold miner’s PNGthat employees, alent) demonstrates it is a who are being monitored and that world-class asset and within assisted by medical personnel US$4.85/boe is something ap-in quarantine. proaching a dollar of earthquake “Strict hygiene, social distancing impact which we are in the process and other COVID-19 management to recover through insurance and protocols the like.” remain in place at Lihir withHe comprehensive testing, quaradded, “In terms of backfill options, we have a number, one of
antine and precautionary them P’Nyang which is subject to contact procedures framing tracing agreements and we are enforced,” Newcrest stated. working with partners in the Gov“Lihir has a dedicated ernment on that Muruk and Hides isolation camp and separateopare also exciting backyard isolation and treatment facilportunities that will enjoy extreme ity where care and support costs capital-efficient development can provided.” and be make the most of very well run the 2023 financial theFrom infrastructure that we have in year placeonwards, there.” Newcrest hopes to place Lihir as aLtd oneMeanwhile, Santos has lowmillion-ounce-per-annum gold ered its production cost guidance producer. at US$8.00 (K28)-$8.50 (K29.80)/ COVID-19 in boeAs(barrels of oilcases equivalent) and PNG rise, Australia’s Prime has upgraded its 2020 producMinister Scott Morrison tion guidance to 87 andsus89 million pended fly-out barrels. fly-in, According to (FIFO) the firm, the staff fromwas flying in to and out operupgrade due a strong of theperformance country as part of its base ating across a broader travel ban. Australia businesses and represents more has outbound thanbanned 50 per all cent growth travel since exemptions to Papua New Guinea, 2015 and 15-18 per cent production according Morrison. growth fortothe year. Its asset of “This willhas include no general PNG LNG produced 30 per FIFO work. If you’re there, you stay. cent above nameplate capacity If you’reextra here, capital. you stay,” he said. without “We goingthe into Incannot spite ofrisk thepeople pandemic, those back to Australia.” firm isareas still onand track to deliver the cost reductions it has announced in
68 64www.pngbusinessnews.com www.pngbusinessnews.com • Issue 142021 2020
March - which sees 2020 guidance decreased to US$8.00 to US$8.50/ boe. Other developments include capital expenditure expected to be approximately US$900 million (K3.15b), steady with the 38 per cent reduction for the year announced in March; the integration of the ConocoPhillips acquisition finished in May with guidance on acquisition synergies heightened from US$90 million (K315m) to US$105 (K368mil) million per annum. Managing director and chief executive officer Kevin Gallagher said that with these developments right on track, the firm is positioned for sustainable shareholder returns to the ban, Ok Tedi MinandPrior disciplined growth. ing,“Our a Papua Newhas Guinea strategy beenminer, to imposed aatwo-week establish disciplinedsuspension low-cost on its international flights last operating modelcharter that delivers week after staff tested positive strong free its cash flows through the forprice COVID-19 hotel quaranoil cycle,”during he said. “Our 2020 tine in Cairns. forecast free cash flow breakeven Afteriscompleting the quarantine oil price less than US$25 (K87.70) time,barrel Ok Tedi’s quarantined employper before hedging and ees were released. around US$20 (K70) per barrel after hedging.”
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MINING
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Adyton Resources starts drilling at Gameta Gold Project
dyton Resources Corporation has started a 3,000-meter diamond drilling program at its Gameta Gold Project on Fergusson Island, which is part of Papua New Guinea’s “Rim of Fire.” The Gameta Gold Project has a 360,000-ounce gold (oz Au) inferred mineral resource, and Adyton’s Wapolu Gold Project on Fergusson Island has a 140,000-ounce gold (oz Au) inferred mineral resource. Given the existing resource on Gameta, the goals of this program are to increase trust and add ounces by drilling deeper and along with strike extension drilling. The Fergusson Island projects are in the same discovery zone as Misima and the nearby Woodlark Island projects. The first drill hole has been finished after two drill rigs were mobilized to the site. By the end of May, the first assay results should be available. The program will supplement the 14,361 meters of
past reverse circulation (RC) and diamond drilling at Gameta. In May, the company will continue drilling on its 100% owned Feni Gold Project, which has a 650,000 oz Au inferred mineral resource and is in a Tier 1 area along a mineral belt that includes the world-class Simberi, Lihir, and Panguna gold and copper projects. Frank Terranova, Chairman, President, and Chief Executive Officer of Adyton said, “The company is pleased to be off to such a fast start after only listing in late February 2021. “Having spent significant time and effort over the past several months creating a portfolio of highly prospective copper and gold exploration projects, the Adyton team is excited to be drilling and working to create shareholder value. The drill rigs are turning, and news flow is imminent. “The company is very well positioned with more than $9 million in cash reserves, over 1,000,000 oz of mineral resources in the inferred
category, and major shareholders and banking partners who remain fully supportive of our exploration strategy.” Terranova stated that recent PNG COVID-19 developments had had no material impact on the company’s exploration campaign since all the Fergusson Island and Feni projects benefited from being located on islands. He said, “The technical teams will remain on-site for the duration of the drilling programs which are protected by appropriate COVID-19 safety and health protocols.” The Gameta job program has the following goals: Diamond drilling will be used to increase the trust in the project’s existing inferred resources, allowing a large part of them to be categorized as indicated or higher. Drilling intended to extend the depth of historical drilling downdip to test for extensions to the existing ore zones will be used to expand the existing resource base.
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MINING
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MRA seeks views over Simberi Gold Project
he Mineral Resources Authority (MRA) is gathering feedback from all project stakeholders involved in the Simberi gold mine in New Ireland to determine the best course of action for the amended memorandum of agreement (MoA). The National Executive Council (NEC) authorised the updated MoA for signing in April 2017, according to managing director Jerry Garry. Since then, he said, several efforts by the MRA to get the parties to sign the 2017 Simberi revised MoA have failed since the New Ireland government (NIPG) has refused to sign. The New Ireland government’s reason for refusing to sign the amended deal, according to Garry, is that its proposal for expanded compensation was not considered. “The benefits include royalties, special support grants and the tax credit scheme,” he said. “The State maintained its position that the current rates stipulated under relevant laws would remain until such time
these rates were reviewed.” NIPG’s requests, according to Garry, were for a 10% royalty limit, up from the 2% prescribed rate; a 10% special support grant (SSG), up from the 0.25 per cent prescribed rate; and a 10% tax credit scheme (TCS), up from the 0.75 per cent prescribed rate. Last year, NIPG sent the suggested amendments to the Office of the State Solicitor (OSS) for legal approval through an NEC request. “The OSS advised that the Simberi revised MoA was approved by the NEC in 2017 and had gone through the legal and the established MoA vetting process and that all parties should sign,” he said. “The MRA is currently in the
process of seeking the views of all project stakeholders on what would be the appropriate action to take in respect to the 2017 Simberi revised MoA. (This is) because it has been five years since the MoA was agreed on by the stakeholders to the Simberi project. The duration of the revised MoA is five years, and the term has naturally lapsed,” Garry said. The Simberi gold mine is run by St. Barbara Ltd.
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72 www.pngbusinessnews.com • Issue 1 2021
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Government weighs lockdown, ‘people not listening or complying’
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f COVID-19 cases continue to rise, the government is considering a lockdown from the new Isolation Strategy. People are not listening or complying with the Niupla Pasin policies, according to Rainbo Paita, the Leader of Government Business. As a result, Cabinet has had to take drastic measures to save lives. “Another main factor is because people aren’t listening, they’re not complying with the new measures and already there is community transmission everywhere,” Paita said. “But the National Executive Council will meet this afternoon (yesterday) and the Health Minister Jelta Wong will update Cabinet on the current statistics, the trend and transmission rate but there has been a lot of concerns raised by ministers in the Cabinet and I can say that the government is consid-
ering a lockdown to help curb the surge.” Paita said that the virus is real, and people need to start taking it seriously. “Numbers are increasing every day, people are dying, and soon the government will have to take drastic measures to safeguard Papua New Guineans lives,” he said. “Doctors and nurses are trying their best, but it seems that the general public is not taking it seriously.” Paita has announced that K2 million has been set aside for masks and sanitisers to all regional health authorities. “We understand that not everyone can afford to purchase a K2 or
K5 mask daily, so the government allocated this K2 million to help support PHAs to procure masks and sensitizers for people in their provinces,” he said. “And PHAs should be distributing these masks and hand sanitisers free of charge to the public.”
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our mother body being PNGTUC, have been following up with PM & NEC Department by way of an NEC Submission but to this date, our welfares have not been looked into yet. The trucking contractors were fairly compensated for their losses but not us.” Another assurance was to include a clause in the framework arrangement ensuring that all affected workers are immediately reinstated to their previous positions prior to the redundancies. The PMAWU Executives have already presented a briefing paper on improved terms and conditions, and they expect their complaints to be heard and properly addressed in the proposed Framework Agreement. “The union also submitted a Position Paper concerning same to all relevant stakeholders in the negotiation tables. If the country is heading for better deals for its citizens, then the workers who will spin the wheels to run the production must be fairly remunerated as well.” “The Union has an option to refuse to resume operations if the above considerations are not met in the final Framework Agreement once settled. Consideration of this option may or may not happen subject to sighting of the final
Framework Agreement.” Following a settlement in talks between the State and Barrick, Prime Minister Marape announced on April 5 that PNG would get a “far superior offer” than the previous agreement, which lasted from 1989 to 2021. “I can assure our country that this is a far superior and better deal, meaning our landowners and Enga Provincial Government will get more, and the balance of equity through Kumul Minerals will mean we hold a majority in equity. “Other benefits include securing an increased and upfront tax with no concession as is the case with other resource projects, an increase in royalties as well as a better handle on environment and resettlement issues at Porgera and a Barrick exit option.” Prime Minister Marape added that “If the last round of negotiation is good, then I intend to meet Enga Provincial Government and all SML and LMP plus impact area landowners at the earliest to discuss the benefits sharing.” Marape has reported that Barrick and has settled a 10-year withdrawal clause in the current Porgera deal. The Prime Minister’s statement made no mention of affected mine employees.
directly affected have suffered since the mine’s closure. “The mine workers, who have been directly impacted since last April, have been struggling to make ends meet,” they said. “Those who were not able to secure an alternative job have been depleting their superannuation savings. They have the necessary skills and experiences to operate the mine when it resumes. Any news to reopen the mine, at the earliest is welcome news for the Union and its impacted employees.” They expressed their delight at the news that the state is ready to ink a Porgera Mine Reopening Framework Agreement with Barrick. Following the mine’s closing, the PMAWU Executives said the Prime Minister made many promises to them. Employees who have been affected will get financial assistance. “The PMJM has made several commitments, on media and also during our meeting with him on the 25th of July 2020 at the Airways Hotel, that his government will consider a monetary solace for those impacted employees, as such the union, with the help of
74 www.pngbusinessnews.com • Issue 1 2021
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MINING
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The agreement was signed at Government House by Barrick Chief Executive Mark Bristow, GovernorGeneral Sir Bob Dadae, and Mining Minister Johnson Tuke on behalf of the State of PNG, and Kumul Minerals Holdings Limited Chairperson Nellie James on behalf of Kumul Minerals Holdings Limited.
LATE BREAKER:
Barrick, Gov’t reach deal on framework for Porgera mine
B
arrick Niugini Limited and the Government of Papua New Guinea have reached an agreement on a binding framework agreement, the first step in the process to reopen the Porgera Mine. The agreement was signed at Government House by Barrick Chief Executive Mark Bristow, GovernorGeneral Sir Bob Dadae, and Mining Minister Johnson Tuke on behalf of the State of PNG, and Kumul Minerals Holdings Limited Chairperson Nellie James on behalf of Kumul Minerals Holdings Limited. The Porgera Mine will be operated by a new joint venture that will be 51 per cent owned by PNG partners and 49 per cent owned by Barrick Niugini Limited, who will continue to operate the mine. The framework agreement also includes provisions for, among other things: • BNL to fund the resources needed to restart the mine. • A raise in the equity assigned to a large community of landowners who are the customary owners of the property where Porgera is located. • PNG stakeholders and BNL to share the economic benefits provided
76 www.pngbusinessnews.com • Issue 1 2021
over the mine’s existence on a 53/47 per cent basis. • After ten years, the state will have the option to purchase the remaining 49 per cent of the mine from BNL at equal market value. The agreement not only outlines prospective benefit-sharing principles and potential operating plans for the mine, but it also lays out the final compliance agreements that must be completed before mining at Porgera can resume – this is expected to happen later this year if mutually agreed conditions are fulfilled. The firm will continue to work with the State Negotiation Team and other government departments to conclude these procedures in the coming months. Although negotiations between BNL and the National Government continue, current Care and Maintenance operations at the mine site will continue. The status of the resumption of mining at Porgera will be updated on a regular basis in the coming months. The reopening of the Porgera Gold Mine at the earliest is good news, according to the Porgera Mining and Allied Workers Union (PMAWU). The PMAWU Executives said in a statement that those To Page 74 >