improving extractives governance
PNGEITI Report Releases
The EITI holds all implementing countries to the same global standard. Through Validation, the EITI’s quality assurance mechanism, implementing countries are assessed on their ability to meet the provisions of the EITI Standard.
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EITI International Secretariat Post Validation Visit to Papua New Guinea
November 11, 2022 EITI INTERNATIONAL MISSION CONCLUDES PNG VISIT ON A POSITIVE NOTE An EITI International mission led by its Executive Director Mark Robinson to Papua New Guinea concluded today on a good note. The EITI International team comprised of the EITI Executive Director, the Director for Asia and the Pacific and the Country Lead for Papua New Guinea arrived this week for a 3 days consultation with the Stakeholders that included the PNGEITI Multi-Stakeholder Group including the development partners. The mission’s main objective was to meet and discuss the outcome and findings of Papua New Guinea’s second EITI Validation (country assessment report) with various players in the extractive consisting representatives from extractive companies, government departments, extractive SOEs and civil society bodies which provided leadership and guidance in guiding the implementation of the EITI Global Best Practice Standard in PNG’s mining and petroleum sector. Head of the PNGEITI National Secretariat Mr. Lucas Alkan said “The visit by the international team to Papua New Guinea just under a month after they have issued their verdict on Papua New Guinea’s progress in implementing the EITI Standard last month recognizes the important role the EITI plays in promoting transparency and addressing governance issues in the extractive industry ” PNGEITI head of National Secretariat Mr. Lucas Alkan said. “The world is in a transitional phase, moving away from carbon dependent fuels to address climate change. In this transition, minerals will play an important role in putting companies and government alike under pressure to mine more as the demand for minerals increase to build carbon neutral machines like electric vehicles. This means Papua New Guinea will be under pressure to undertake mining and petroleum development activities where there is potential for illegal practices and corruption to creep in given such circumstance. EITI will play in important role in this transition period to hold authorities and companies accountable for their conduct in managing the sector and to abide by the rules and regulations governing the extractive sector in our jurisdiction. Photo caption: L-R: Emanuel Bria, Country Officer – Asia, Mark Robinson EITI Executive Director and Lucas Alkan Head of PNGEITI National Secretariat during a press conference held on the last day of the mission, Friday November 11, 2022.
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PAPUA NEW GUINEA ACHIEVES MODERATE RATING IN ITS SECOND EITI VALIDATION
October 31, 2022 PAPUA NEW GUINEA ACHIEVES MODERATE RATING IN ITS SECOND EITI VALIDATION (COUNTRY ASSESSMENT ON EITI IMPLEMENTATION) Following Papua New Guinea first Extractive Industries Transparency initiative (EITI) validation in 2018, the EITI international governing body has issued its second assessment on the country’s progress in implementing the EITI Standard. The assessment suggests that Papua New Guinea has not made any significant progress from its first validation in 2018 where it achieved ‘meaningful progress’ (satisfactory achievement). The second validation undertaken this year demonstrated that PNG had made ‘moderate progress’ which is basically an average middle score. Though the first validation was based on the 2016 EITI and the second validation was based on the 2019 EITI Standard, the bottom line scoring granted was an average or a median score in the overall EITI global assessment score card. Released by the EITI Board on 4th October, 2022, the Papua New Guinea EITI Validation report provides a critical and independent opinion and assessment on the role EITI should play in enhancing transparency and good governance in the extractive sector to derive the best outcome for the economy and its citizens from the development of PNG’s rich mineral wealth. PNGEITI Head of National Secretariat Mr. Lucas Alkan welcomed the EITI Board’s candid assessment and decision on PNG’s effort to implement the EITI, describing it as fair assessment, taking into account the efforts put in by the PNGEITI Multi-Stakeholder Group over the years since 2013 when the Government signed up to implement the EITI. “The implementation of the EITI Standard in Papua New Guinea had its own set of challenges but steady and improved progress had been made to ensure the quality and comprehensiveness of EITI reporting improved over time by addressing the gaps that were identified in the first validation for PNG to meet all the requirements of the EITI Standards with the objective of becoming a compliant country,” Mr. Alkan said. “We consider the second country assessment as consolidating the corrective actions that have been taken and the work currently in progress. PNG has made significant progress in implementing the EITI relative to other economies around the world that are implementing the same EITI Standard. “Domestically, credit must go to all stakeholders particularly the tripartite body, the Multi Stakeholder Group (PNGEITI MSG) Chaired by the Treasurer. This ensured that the information required by the EITI International Secretariat and the independent validators for this assessment were transmitted with efficiently. The information and data supplied were highly verifiable which provided the confidence required for the EITI International Secretariat and its independent validators in conducting and delivering the second EITI Validation assessment,” Mr. Alkan said. “Papua New Guinea has fully met ten, mostly met twelve and partly met seven requirements, with three requirements assessed as not applicable. I am very optimistic that PNG will soon become one of the leading EITI implementing countries in the world, attributed to the commitment that have been put into the EITI implementation activities over the years by the PNGEITI Multi Stakeholder Group. This level of commitment had grown from strength to strength, influenced by such reviews and independent country assessments” he said. The EITI is a global standard for reporting company payments and government receipts as revenues from the extractive sector. These payments and receipts are reconciled by an independent auditor and the information is disclosed through the annual EITI reports for public debates. PNG operationalized EITI implementation in 2015 and published its first report in 2016. Since then it has so far published seven country reports covering successive financial years. The 2021 and 2020 reports are now being worked on and are expected to be published by December this year. Download Full Validation Report: PNG Final Validation report 2022 Photo caption: Members of the PNGEITI Multi-Stakeholder Group, during the first quarter meeting this year.
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PNGLNG PARTNERS IMPLORED TO DISCLOSE NATURE OF TRANSACTION
Date: 29th September, 2022 MEDIA RELEASE PNGLNG PARTNERS IMPLORED TO DISCLOSE NATURE OF TRANSACTION An undertaking by state owned Kumul Petroleum Holdings Limited (KPHL) to increase its PNGLNG equity through a conditional arrangement between PNGLNG partner Santos has raised concerns over the lack of transparency surrounding the whole arrangement and the partial financial transaction that already took place between the parties involved, according to the PNG Extractive Industries Transparency Initiative. (PNGEITI). KPHL has offered to acquire five percent (5 %) of Santos equity in the PNGLNG Project with asset valued at US$ 1.4 billion. This includes a proportionate share of project finance debt of approximately US$ 0.3 billion which is the condition upon which this commercial arrangement that has been made. PNGEITI Head of National Secretariat Mr. Lucas Alkan said following publication of this arrangement in the media this week . “While it is understood that the compromise between two major players in the PNGLNG project as purely commercial, the PNGEITI is concerned at the opaque nature of the environment in which such arrangements are being made, particularly when substantial amount of money belonging to the people of PNG entrusted under the stewardship of KPHL is involved. This deal can easily be likened to the controversial UBS transaction which recently ended up being investigated by a Royal Commission of Inquiry that cost the State millions of Kina in tax payers’ money. We understand KPHL had already made partial payment of US$55 million and subsequent payments to finalise the transaction are expected to be made before the end of December this year. KPHL has a moral and corporate reasonability to be transparent and accountable to Parliament and the people of this country when conducting its business in this sector” Mr Alkan said. “The PNGEITI, a global best practice standard for the good governance of the extractive sector that PNG is a member of takes the position that KPHL must inform the public on where financing is being sourced to secure the purchase of the 5% additional equity for the State. The details of this transaction, whether it is being funded from KPHL’s budget, any external borrowing by KPHL on behalf of the State (if so, what asset is being used as collateral) or through the National Government Budget (this is not in the 2022 supplementary budget). Further, it is not clear as to whether NEC had approved for KPHL to execute this transaction to acquire additional equity from Santos. The public has the right to know these details and understand as to how KPHL’s balance sheet would be affected given that a US$ 0.3 billion debt would be inherited from Santos. The PNGEITI is not against KPHL’s proposal to acquire an additional 5% equity from Santos as it is consistent with the Government’s policy objective of having a greater equity interest in resources developments however, Santos’ intention to deal exclusively with KPHL regarding the sale raises a lot of questions. We strongly urge KPHL and Santos who are both active members of the PNGEITI Multi Stakeholder Group (MSG) to demonstrate good corporate citizenship and uphold the principles of the EITI Global Standard by disclosing the commercial and economic nature of this transaction for the sake of transparency and accountability in this planned sale of Santo’s 5 percent share in the PNGLNG to KPHL,” Mr. Alkan said. ENDS/ Authorised by: Lucas Alkan Head of PNGEITI National Secretariat
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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..
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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..
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