Page 23 - IB July 2020

Opinion

Shane McLeod, Sarah Kuman
PNG MINING: LAYOFFS AND LAWS

By Kevin McQuillan McLeod says the shutdown and retrenchment of the staff
is going to make the task of re-opening of the mine more dif-
The Parliament of PNG has passed a series of amendments ficult.
targeting the mining, oil and gas industries, which give the “There are potential suitors to join the PNG government on
Minister greater flexibility in determining whether to grant or the project, but there is also the prospect of a long and drawn
refuse petroleum development licences, according to a brief- out legal process because of the dispute between the existing
ing note by law firm, Allens. operators and the government.
One of the key elements for the mining industry is that Any new partner might find themselves in a difficult posi-
the Mining Minister may impose a ‘minimum expected level tion, and find themselves caught in the dispute.”
of return’ for the State on a licensee, say Allens authors Rob They would need to have a relationship of some kind with
Merriam, Jacqui Rowell and Sarah Kuman, writing in Insights. the existing joint venture, ”if only to take control of the mine
“What the level of return might be, how it would be calcu- site and infrastructure”.
lated and how it would be enforced are not prescribed in the One possible partner, says McLeod, is Kumul Minerals Hold-
O&G Amendments,” they say. ings, which now holds the government’s stake in the Ok Tedi
Existing applicants may also be subject to these amend- mine.
ments if the Minister has not yet granted their licence, they “Perhaps the government wants to see if that vehicle can
add. provide the expertise and/or finance to take over the mine.
The legislation follows the Marape government’s refusal “It seems to be a risky gambit. The pain is going to be acute
to grant an extension of the Porgera mining licence which in the short term. It’s going to be felt by the mine workers,
expired last August, although JV company Barrick New Guinea the local and regional economies, and the government itself.
Ltd (BNL) had sought a 20-year extension as far back as June “Mr Marape’s hope seems to be that the eventual outcome
2017. – presumably a greater financial stake in the project for the
Barrick’s CEO Mark Bristow’s reaction was that it was “tan- government, and the local Enga provincial government in
tamount to nationalisation without due process” and legal particular – is worth the pain, and is in Mr Marape’s long term
action in the PNG Courts is continuing. interests as well.”
This month (July), Barrick has begun to layoff staff. Ac- Meanwhile, oil prices are also having an impact on PNG’s Oil
cording to Barrick, most of the 116 expatriate to employees Search, which has axed a third of its workforce because of a
have already been retrenched, while 2650 PNG nationals will fall in demand.
have their employment terminated prior to the end of July Oil Search announced on its website that it has shrunk its
at a projected cost to the company of K180 million (US$52 full-time workforce to 1,222 - with another 137 to move on
million). by the end of 2020, as it seeks to shore up its balance sheet
“This is already having a big impact on the economy,” Shane in an environment of low crude oil prices as well as reduced
McLeod, analyst at the Lowy Institute, told Islands Business. demand.
“There’s the direct impact, which is the lost revenue from It also said it would boost senior leadership roles for PNG
the mine and the government’s share of that. But it’s also the citizens: expatriate positions in PNG will be reduced to 7% of
related businesses: there are contractors in and around the all jobs, while the percentage of women in the workforce and
mine who’ve lost work. It’s also the logistics and associated executive positions will rise to about 28%.
businesses right down the Highlands Highway to Lae.” The oil and gas producer currently has women occupying
The Porgera Joint Venture says a small number of staff will four out of 16 board and management positions.
be kept on to maintain safety and environmental processes.
Retrenched workers will return to their home villages and editor@islandsbusiness.com
provinces.

Islands Business, July 2020 23