Papua New Guinea Extractive Industries Transparency Initiative (PNGEITI)

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TIMELY ACTION BY GOVERNMENT IS CRITICAL TO REALISE GROWTH PROJECTED BACKED BY THE EXTRACTIVE SECTOR

The PNG economy stands to make a quick recovery and growth can pick up this year if the Government acts early to facilitate recovery in a fragile environment as the country slowly recovers from the Covid 19 challenges, according to the PNG EITI.

Head of the PNG Extractive Industry Industries Transparency Initiative Mr Lucas Alkan was commenting on a recent Word Bank Report, which projected  the PNG economy to grow by around 4 per cent this year- largely driven by growth in the extractive sector. The projection was  made in its  Economic Update for PNG released in March this year. The Bank’s projection stems from its estimate of the economy returning to positive growth of 1 per cent in 2021 after contracting by 3.5 per cent in 2020.

“The economy is currently in fragile state, particularly when it is emerging from the aftermath of the Covid 19 pandemic induced disruptions that had devastating impact across all sectors of the economy. The pandemic has created room for complacency and brought about new approaches to living and conducting business as we have been introduced to the ‘new normal’ way of living and doing business in recent times” Mr. Alkan commented.

He indicated that the Bank’s growth forecast is dependent on a number of risks factors that are at play relating to the extractive sector. He said some of these are external risks such as the rising fuel prices brought about by the Russian and Ukraine war which “we have little or no control over”

.”However, there are other risks that can be managed in the remaining months of this year” he observed

“Firstly, the Porgera Mine needed to be re-opened immediately to contribute to the growth projected. The prolonged delay in re-opening the Mine has resulted in significant revenue loss to the State and loss of employment and benefits to local communities. The shutdown of the Mine is having direct impact on the current foreign exchange shortage in constraining business operations domestically. Porgera Mine had been a good source of foreign exchange inflows and its continued shutdown is not assisting PNG to achieve the 4% growth projected by the World Bank,” Mr. Alkan said

Mr Alkan said the growth was projected almost 4 months ago, assuming that the Government would conclude negotiations and re-open the Mine before June, however this has not eventuated. Reopening the Mine anytime soon seems not feasible in light of the current national general elections that will take us up to August for a new government to be in place.

“If all in order the Mine can be re-opened but then the lead time required for mobilizing resources and the significant start-up capital needed to get the mine back to its full operating capacity is a big challenge. Realistically, we may be looking at around October or November for the start-up but then it will be almost end of the year so for Porgera to contribute to the projected 4% economic growth seems unlikely”, Mr Alkan said.

“Secondly, the inherent political risk associated with the current national general election and the formation of a new government is likely to delay any efforts to start up new resource projects currently in the pipeline. The commencement of at least one or two of these projects at the earliest possible time will have positive impact on the economy, and in as far as contributing to the 4% growth projected. Unfortunately, election activities have generally stalled things until a new government arrives but this may not be too soon until around August or September for the new regime to pursue with outstanding negotiations to reach agreements to bring these projects on-line. These projects include; Wafi-Golpu, Frieda and the Papua LNG project that have the potential to contribute positively to the economy during their construction phases.

Thirdly, there is a real risk for the Covid-19 pandemic to surge again, disrupting economic activities in this very fragile environment, especially given the vaccination rate is very low. This is highly likely due to large gatherings taking place right across the country since political campaigns commenced following the issue of writs in May,” he said.

Mr Alkan indicated that some of the above risks and challenges could be minimized if the current or incoming government takes immediate actions within the remaining months. It is understood that the final agreement for Porgera reopening will be sanctioned soon by Mineral Resources Enga (MRE), the remaining party to sign the recommencement agreement.

‘We hope this agreement will be sealed at the earliest for the next phase which is the application of the Special Mining Lease (SML) to recommence the mine.

PNGEITI commends the transparent negotiation process that has taken substantial amount of time and effort to ensure the interests of all parties are reflected in those agreements. We believe the re-opening of Porgera Mine will live up to the expectations of institutions such as the World Bank that predicated PNG’s positive economic growth to be driven strongly by the extractive sector this year.

It would be very critical for the incoming government to also engage with the developers to bring the new projects already in the pipeline on-line at the earliest which will contribute positively to the economy.

We re-echo the World Bank’s sentiment that the PNG economy is navigating a fragile recovery period and if the Government does not act decisively and fast to re-open the Porgera Mine and bring on-line new projects in the pipeline in the next few months then it will be highly likely that the Bank’s projected growth for the extractive sector will not be achieved,” Mr. Alkan said.

ENDS..

LIVE MINING DATA EXCELLENT TOOL FOR TRANSPARENCY

LIVE MINING DATA EXCELLENT TOOL FOR TRANSPARENCY

 

The PNG Extractive Industries Transparency Initiative (PNGEITI) has applauded a collaboration between state’s mine regulator, Mineral Resources Authority (MRA) and mine  operators to create a digital platform to provide real time mineral data from all major mines in the country.

Live data  will  include numbers showing production value, export value, and related information basically livestreamed from a data source of respective mine operators.

Ok Tedi Mine will be fist to streamline live data to the MRA website for public access after engineers have finalized  work. Other will follow soon after.

“The cooperation between the mine regulator and the extractive companies to make live data available for public viewing is an excellent undertaking to garner  investor-public trust and confidence in the way the mining industry is regulated and progressing. PNGEITI highly commends these efforts,” PNGEITI Head of National Secretariat Mr. Lucas Alkan commended.

“We commend the MRA leadership under managing director Jerry Garry as this undertaking will complement and enhance EITI reporting in the country. This is boost for transparency, boost for investor and public confidence,” he said.

 

“We look forward to this important work being undertaken on this space and wish MRA and the companies every success” Mr. Alkan said.

 

ENDS..

 

Papua New Guinea prepares for Second Validation on EITI Implementation

The Head of Papua New Guinea Extractive Industries Transparency (PNGEITI), Mr. Lucas Alkan announced today that the country will be validated for the second time since PNG signed up to implement the EITI global best practice Standard in 2013.

The validation exercise is set to commence on the 30th of October 2020.

Mr. Alkan stated that the validation is an essential feature of the EITI implementation process. It is intended to provide stakeholders with an impartial assessment of whether EITI implementation in a country is consistent with the provisions of the EITI Standard.

PNG underwent its first validation in 2018 in which the EITI Board granted ‘meaningful progress’ in implementing the EITI Standard. The Board commended PNG’s efforts in implementing a number of reforms to address weaknesses in government systems and in improving the level of transparency in the country’s extractive sector.

The Board recognised PNG’s efforts in ensuring appropriate multi-stakeholder oversight of EITI implementation and aligning objectives for the EITI with national priorities. It further commended the country’s efforts to produce EITI data in a timely manner and to effectively disseminate the findings of the EITI Reports to influence public debate.

The Board welcomed the government’s continued commitment to strengthening government systems by using the EITI process as a diagnostic tool to support reforms. As part of improvements of such systems, the EITI Board encouraged PNG to pursue efforts to systematically disclose data required by the EITI Standard as part of routine government and company disclosures.

The outcome of the first validation was a positive step for PNG in the EITI implementation process, and demonstrated that the EITI process can contribute to enhancing transparency and accountability in the management of resources related revenues.

In granting ‘meaningful progress’ to PNG in its efforts to implement the EITI, the Board allowed 18 months (up till 30 April 2020) for PNG to take corrective actions on the areas identified to meet the EITI global standard before a second validation was undertaken.

There were 14 areas identified as having made no progress or inadequate progress which required actions to be taken.

The 14 corrective action areas included:

  • public disclosure of information related to the award or transfer of mining tenements and oil and gas licenses pertaining to companies covered in the EITI Report;
  • ensuring a comprehensive list of state participation in the extractive industries, including terms associated with state equity and any changes in the year under review, be publicly accessible;
  • ensuring that complete production volume for oil and gas, and production values for each of the extractive commodities produced during the year under review be publicly accessible and disaggregated by commodity;
  • ensuring that export volumes and values are disclosed publicly for each mineral commodity (including oil, condensate and gas) exported in the year under review;
  • ensuring that the materiality threshold for selecting companies ensures that all payments that could affect the comprehensiveness of EITI reporting be included in the scope of reconciliation;
  • undertake a comprehensive assessment of transactions between extractives SOEs (and their subsidiaries) and mining, oil and gas companies, as well as between the extractives SOEs (including their subsidiaries) and government in its scoping for future EITI Reports;
  • establish whether direct subnational payments (to government entities) by extractives companies are material;
  • an assessment of whether the payments and revenues are subject to credible, independent audit, applying international auditing standards;
  • clarify which extractive revenues are recorded in the national budget;
  • ensure that material subnational transfers of extractives revenues are publicly disclosed, when such transfers are mandated by a national constitution, statute or other revenue sharing mechanisms such as benefit-sharing agreements;
  • ensure that reporting of mandatory social expenditures be disaggregated by type of payment and beneficiary, clarifying the name and function of any non-government (third-party) beneficiaries of mandatory social expenditures; and
  • undertake a comprehensive review of all expenditures undertaken by extractives SOEs (and their subsidiaries) that could be considered quasi-fiscal.

Mr. Alkan indicated that the onset of the Covid19 pandemic late last year and the associated lockdowns and restrictions to normal operations had severely affected our ability to prepare well by addressing the above areas before the second assessment.

He said that due to the Covid19 pandemic, the EITI Board deferred PNG’s validation from April to October 2020. A further deferment to next year would work well for us in our continued effort to take corrective actions, however this did not seem imminent.

Despite the Covid19 inflicted disruptions, he encouraged all stakeholders involved in the EITI implementation process to prepare as best as we could for the second validation.

The Head of Secretariat emphasised that failure to make considerable improvements in the above areas (in the second validation) could result in PNG being suspended from the EITI in accordance with the provisions of the EITI Standard.

Full details of the PNG’s Validation outcome can be viewed on EITI website or the PNGEITI websitewww.pngeiti.org.pg

File photo: February 2020, Port Moresby: PNGEITI Technical Working Group during the second Validation Workshop.

COMMENTARY: Extractive Industries Transparency Commission Bill Regional Consultation Underway

REGIONAL CONSULTATION FOR THE PROPOSED EXTRACTIVE INDUSTRIES TRANSPARENCY COMMISSION BILL IS UNDERWAY

A Commentary By Gedion Timothy 

The extraction of minerals such as gold, copper, zinc and petroleum resources such as liquefied natural gas is complex and challenging. The complex and challenging environment presents both opportunities and challenges for economic advancement for any nation. Governments must be applying the right fiscal tools to derive best value from the extractive value chain particularly for countries like Papa New Guinea which is known to be richly endowed with natural resources and its difficult geography. Strong political leadership backed by a robust service delivery model is key to unlocking value for the extractive industry activities.

It is good to note that the Papua New Guinea state wheels are in motion to implement ambitious state initiatives ranging from policy reforms to legislative changes to resources laws to unpack the economic value the resource sector has for Papua New Guinea’s future.  For example, a proposal to establish a Sovereign Wealth Fund (SFW) was a brilliant move in itself with key officials from the department of Treasury and Bank of Papua New Guinea (BPNG) providing technical oversight- to initially park Government windfalls from the PNGLNG Project for budget support and future use. Drop in oil prices commencing 2014 appears to have temporarily watered-down efforts to get this wealth fund operational but Papua New Guineans still have the faith that the wealth fund will come to fruition at some point in time for the benefit of future generations.

This is a clear testament of the fact that the PNG Government does not fold arms and watch as a by-stander only to collect its dues from the extractive industries for budgeting purposes but also an active participant in the economic value chain of resource projects. The PNG Mining Act provides for the State to acquire up to 30 percent share in any mining project and similarly the Oil and Gas Act provides for the state to acquire up to 22.5 percent shares in petroleum projects.

The streamlining of Government business through the Kumul arrangements strongly demonstrate how smart those in leadership think and plan for the future of Papua New Guinea. The Kumul arrangement places the Sate in a better position than before to actively participate in PNG resources sector.

Alongside these activities, the PNG Government is also serious about promoting transparency and accountability in the mining and petroleum sector which is the present powerhouse of the PNG economy.

Since 2014, the PNG Government commitment is demonstrated through the publication of six reports in strict compliance with international reporting best practice known as the Extractive Industries Transparency Initiative Global Standard.  The seventh PNGEITI Report will be published in the coming days.

A small secretariat situated at the Department of Treasury coordinates a tripartite constituent of key Government agencies, mining & petroleum companies and civil society organisations for oversight and guidance in the publication process of the EITI Reports.

Papua New Guinea is among a band of 53 countries promoting transparency and accountability in the mining and petroleum space through the EITI Reporting process.

Close to seven years into implementing the EITI, a proposed legislation to transition the Papua New Guinea Extractive Industries Transparency Initiative National Secretariat into a statutory body is undergoing public consultation beginning this month.

This follows the successful conclusion of a series of consultations among legal and technical officials of key government institutions, mining & petroleum companies and civil society organizations on the elements of what is proposed to be the Papua New Guinea Extractive Industries Transparency Commission in Port Moresby towards the end of last month.

Head of PNGEITI National Secretariat Mr. Lucas Alkan thanked instrumentalities involved for progress made so far in shaping an appropriate legislation that will be a best fit for the replacement of the PNGEITI National Secretariat which is now situated at the Department of Treasury.

“When enacted into law, the PNGEIT Commission will function as a statutory body for the implementation of the global Extractive Industries Transparency Initiative Standard and principles through the publication of EITI Reports,” Mr. Alkan says

“The push for the establishment of the PNG EIT Commission is part of a bigger policy drive to institutionalize and systemize EITI reporting anchored into the PNG legal and policy framework.

“PNG has made considerable progress with the publication of seven flagship PNGEITI Reports since PNG subscribed to the EITI Global Standard in 2014 to promote transparency and accountability in mining and petroleum sectors to enhance good governance and better management of proceeds from these important sectors of the economy.

“Seven years into implementing the EITI Standards through the publication of EITI Country reports and considering the fact that PNG is endowed richly with mineral and petroleum resources, PNGEITI is maturing into its next stage to meet the evolving challenges of the industry.

“What the PNGEITI Multi Stakeholder Group is doing now is to legally establish an entity to render administrative services for effective EITI implementation in Papua New Guinea.

“I am pleased to note that considerable progress has been made so far with a draft bill already in our hands and also pleased to note that the PNGEITI is comfortable with this piece of legislation which will undergo further public consultation in the coming months.

“A technical team conducting consultation on the draft bill commenced this week in Kokopo, East New Britain with a weeklong consultation scheduled to take place in Kavieng, New Ireland Province starting next week Monday, 12th July, 2021,” says Mr. Alkan.

Papua New Guinea is richly endowed with natural resources for economic development and progress when the resource are put to prudent use as opposed to squandering them or improperly exploiting to the indulgence of a tiny minority. At the watchful eyes of the Papua New Guinea population, it is the function of the State to ensure that proceeds of economic activities associated with the resource sector is trickled down for the benefit of all citizens. The technical nature of the extraction of natural resources presents opportunities and the leeway for corrupt practices to persist.

Photo Caption: (Left) Head of the PNGEITI National Secretariat Mr Lucas Alkan with Channan Kumalau of the Department of Petroleum after a state Technical Working Group Meeting on the Extractive Industries Commission Bill last month in Port Moresby.

Note: The author is short-term journalist with the PNGEITI National Secretariat. The views expressed are his own and does not reflect those of the PNGEITI NS or the PNGEITI Multi Stakeholder Group (MSG). 

The elements of the proposed EIT Commission bill will be discussed next week in a similar article. 

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