AS projected by the Bank of PNG (BPNG) and all other international financial institutions including the International Monetary Fund (IMF) and the Asian Development Bank (ADB) in 2015, 2016 proved another tough year on the business front.The global economy remained depressed and global economic growth weakened due to the lower activity in the advanced economies, Brexit announcement as well as the on-going rebalancing of the Chinese economy. Growth projections by the institutions for 2016 were all revised downward. The ADB to 3.0 per cent from the earlier 3.6 per cent forecast with it expected to pick up slightly to 3.3 per cent in 2017, while BPNG in its latest Quarterly Economic Bulletin (QEB) June 2016 released in November, quoted the IMF also revising its forecast to 3.1 per cent from its earlier forecast of 3.2 per cent made in April 2016. Further the World Bank’s forecasts were relatively lower with its global growth projection of 2.4 per cent made in June 2016, compared to its January forecast of 2.9 per cent. Inflation picked up in the advanced economies but still remained at low levels, while in the emerging markets and developing economies remained steady as currencies stabilised or appreciated in some cases. The trickle down effects of the global recession was felt in country, thus resulting in the National Government revising down its growth projections to 2.2 per cent. However, there was some optimism this will pick up in 2017.
Inflation levels in PNG on the otherhand was revised up to 6.5 per cent with projection that it would rise further to 7.5 per cent in 2017. So how did this affect the economic sectors and what were the highlights for 2016? Chairman of the Chamber of Mines and Petroleum Gerea Aopi, at the 14th Mining and Petroleum Conference in Sydney, summed it up well for these two important sectors. Mr Aopi said latest statistics from the Department of Treasury showed the total mineral and petroleum export revenues at K17.86 billion in 2015 and this year anticipated to rise to K19.99 billion. He said this was a clear indication of the significant contribution made by the resources sector to the PNG economy generating billions in state revenue, thousands of jobs, business development and social improvements in health and education. Mr Aopi told delegates the situation remained equally challenging as it had been two years ago, but with some ray of hope. That being some gradual recovery in commodity prices.
He said the last two years had been a roller coaster ride for most of the country’s producing projects, with it being impacted by the El-Nino and the fluctuating commodity prices. For mining in particular there was an air of uncertainty with some reforms underway, including the proposed changes to the current Act. He said the closure of PNG’s largest mine-OK Tedi Mining, Porgera due to the El-Nino and Ramu as a result of a fatality at its processing facility at Basamuk were some of the pitfalls that had been recorded. However, these projects are back in production. On the exploration front in the minerals sector, the chairman had stated they were declining especially in the grassroots sector, while in the petroleum sector he had stated and according to Oil Search’s estimate only 40 per cent of PNG’s full oil and gas potential had been discovered. Of this total, about 15 per cent of that is being or has been produced, 25 per cent of it is discovered, while 60 per cent is still to be found. On the upside the chamber reported that headway is being made with Freida River in East Sepik Province and Wafi-Golpu in the Morobe Province. It noted that these two projects have the potential of propelling PNG onto the world copper stage. For Freida, the developer PanAust has spent US$65 million (K21.14m) and is looking at raising an additional US$3.6 billion (K96b) to build an operation that will mine and process 40 million tons of ore annually. Work is expected to start in 2018 with production expected in 2024.
According to Mr Greg Anderson, the executive director of the Chamber of Mines and Petroleum, the first stage of development would cost US$2.6 billion (K8.45b) and yield an internal rate of return of 16 per cent. Also in the mining sector, another standout would be the progress by Canadian miner Nautilus who this year was able to successfully take out a bridge finance to progress the world’s first ever deep sea mine. Another major highlight for the sector and in the petroleum sector by far would have to be the InterOil shareholders approval of ExxonMobil’s offer to buy out 100 per cent of its shares. Oil Search had made the initial offer but InterOil had option for the deal with the American energy firm. The transaction was supposed to be completed by September but following an appeal filed by InterOil’s former boss and shareholder Phil Mulacek, this has had to be differed until the matter has been resolved. Post Courier /Pacific Mining Watch