The ratings agency Standard and Poor’s is adopting a ‘wait and see’ attitude towards the O’Neill government’s nationalisation of the Ok Tedi mine and its owner, the PNG Sustainable Development Program (PNGSDP).
The town of Tabubil in Western Province, adjacent to the Ok Tedi Mine (Credit: OTML)
Prime Minister Peter O’Neill has sacked Sir Mekere Morauta as chairman of Ok Tedi Mining Limited and installed four new directors on the board, after passing legislation transferring all the shares in the Ok Tedi mine to the state.
Parliament also passed legislation making the former owner, BHP Billiton, liable for environmental damage caused by the Ok Tedi mine. O’Neill has also instigated an inquiry into the way in which the SDP was established.
A one-off case
Standard & Poors’ Craig Michaels
‘Ok Tedi appears to be a one-off, isolated case in some respects,’ according to Craig Michaels, Standard & Poor’s sovereign credit analyst for PNG.
‘But we’d expect that mining companies are watching closely. The decision to remove BHP Billiton’s immunity from prosecution for environmental damage, in particular, may have surprised miners a bit.
‘The key question for us is whether this raises miners’ perception of sovereign risk in PNG, and whether this has a material effect on future mining investment. If that happened, it would be quite damaging for PNG’s economy.
‘Because of PNG’s law and order problems, there’s virtually no foreign investment outside of mining, and government revenues are heavily skewed to mining.
‘Recent developments look fairly positive, though. The economy is being dominated by the ExxonMobil LNG project, which is absolutely huge in comparison with the rest of PNG’s economy. This project is nearly finished and due to start production in 2014. But the company, as late as September, is talking about wanting to double production through further investment.
‘So that’s a very good sign that, if the returns are high enough, investors in the mining and gas sectors are still willing to work in PNG.’
Growing opposition
Opposition to the O’Neill government’s nationalisation of the Ok Tedi mine appears to be growing, with the Catholic Bishops adding their disapproval.
Landowners said they would take legal action against the government, telling Radio Australia: ‘They’re stealing from us…It’s unconstitutional and it’s been very greedy and selfish.’
The Catholic Bishops of PNG said in a statement they wanted to express their profound disappointment ‘with what our leaders in government have done by appropriating OTML (Ok Tedi), which could result in the cancellation of PNG Sustainable Development Program’.
‘PNGSDP is one of the premier development organisations in PNG,’ the bishops wrote.
‘It has done so much good. It would be foolish to terminate it. The people at PNG Sustainable Development Program should fight to continue their good work and we should support them.’
USD 0.2860
AUD 0.4065
GBP 0.2210
EUR 0.2430
NZD 0.4353
JPY 30.18
SGD 0.3882
As a student from western province training to become a teacher,I’ am not happy with otdf because they not concerning us.One thing that they did to us is the school fee,they paid 60% only and those students who are studying business were paid 100% which is not fair.Teachers will come back and serve the community not the business and other trade students.
As a person from Western Province I must say that since 1975 no National Government or the Fly River Provincial Government has pragmatically addressed the poverty level of the people of WP. The irony is that sons of WP like my father fought in the WW2 to free this country and became policeman to colonize the highlands region region who now live better lives and my people still suffer. If this move is to give WP autonomy and purpose so be it do away with PNGSDP’s stunt projects and establish impact infrastructures that will accommodate WP’s geographical and humanitarian needs. The next monster the NG and WP government must look at is RH. BUT the PM and the Governor must be true to their word and let only the elites of WP to control this phenomenon.
I am not in favour of the GoPNG taking over PNGSDP and WP people’s 63.4%. The PM and his government has done injustice to the people of Western Province. It has totally neglected the people of Western Province through its national role and through the Fly River Provincial Government (FRPG). NEVER in the Fly River corridor you would see an impact/transformational project funded by the National nor by FRPG, except by funds from OTML through the CMCA Company, OTDF/OTFRDP and PNGSDP. The government neglected the people of the Fly River 38 years ago since Independence in 1975.
The reason for take over is very simple and straight forward; BHP was still controlling OK TEDI thru the majority share holding by PNGSDP and parking money outside in Hong Kong when this can be used directly to support the PNG budget and thus whole of PNG and its people. This is exactly what is O’Neil is doing, now someone out there tell me what is wrong with that and why BHP should continue to control one of PNG’s biggest mines and it’s profits. We are a sovereign nation and we can thru our Prime Minister do as we desire what we beleive from time to time to be good for our nation and people. If any of you are crying over this have been following the take over closely, you will have heard O’Neil admitted that government does not know how to and is not in the business of running any mines and will not run Ok Tedi mine, Ok Tedi will continue to run the mine, you will also have even seen O’Neil come on EMTV and publicly announce that Tolukuma will come under OK TEDI and Ok Tedi will run Tolukuma, this is a vote of confidence in the management of OK TEDI mine. There you go, rest assured O’Neil is doing the right thing for every citizen of this country. Maybe we should also have O’Neil do more and have his government introduce a minerals tax on all mining companies like what Australia has done and have these companies pay a much higher tax to the government so that the money goes to PNG government to be used for the people of PNG.
Robert Leo……..PNGSDP/OTML has spent over a Billion on environmental damage mitigation programmes……not 1 single toea from GoPNG……..PNG Government hasnt “dealt” with any environmental issues in WP…….apart from allowing rampant logging in WP…….
Their could be some discussion on the merit of Govt owning a mine……but the method used to gain ownership of Ok Tedi mine, is certainly not the way a sovereign nation wants to conduct its affairs especially if we want to have any credibility with investors
There is no one government business entity in the likes of Telikom, PNG Power and Post PNG to name a few have fared well including Tolukuma mine. How better will they manage Ok Tedi with all SOE’s already collapsing?? Please leave Ok Tedi Mine alone for PNG Sustainable Development to manage. It is serving the needs of the People of PNG.
That is exactly true. The reason for the take over is argued that PNGSDP has not done enough in Western province in the last 10 years. The question then is how much had the government and Fly river provincial government done in the last 38 years there. The fact is that the prime minister is grabbing hold of the investment funds to bail PNG out of the massive K7 billion debt.
Can the critics of the Govt look at what Nauru is doing now with their Phosphate Mine. A very good example to draw from to see why the PNG Govt is moving that direction , to own the mine and mine it by itself.
The issue with former owner leaving environmental pollution obligation to PNG Govt alone to deal with is one that needs to be looked at carefully.