Natural Resources in Papua New Guinea

Papua New Guinea (PNG) is rich in minerals, petroleum, forests, marine resources, fertile soil and swiftly flowing rivers (from which hydro-electric power can be produced). With the cooperation of the Australian Bureau of Mineral Resources and the Commonwealth Scientific Investigation Research Organisation, the Administration organized in 1947 extensive geological, land use and forestry surveys which accumulated much valuable information that was handed over to the PNG government at Independence. There was little exploitation of natural resources other than gold prior to the 1960s. Between 1967 and 1992 substantial minerals and petroleum and forestry projects were developed. The most important mineral exploitation has been of copper and gold. Investment and management has been by foreign companies with a PNG government equity in major projects. The major problems associated with the exploitation of natural resources are the ownership of the land in which the resource is found, the amount of royalties to be paid to landowners and damage to the environment.

The Bougainville Copper Ltd mining project was a major source of income for PNG from 1972 until the Bougainville rebellion forced the closure of the mine in 1989. The Ok Tedi mining project has operated productively since 1984. Gold has been mined for some years at Misima. A mineral and petroleum boom began in the early 1990s. In 1992 mineral and petroleum exports represented 80 percent of PNG’s commodity exports by value. The most important minerals to date have been copper and gold. Porgera was the most important gold mining project operating in 1993. Copper and gold have been found but not exploited at Wafi and Hidden Valley. In September 1993 an agreement was signed to exploit a very rich gold deposit on Lihir Island.

In 1992 crude oil was produced at Kutubu, PNG’s first oil field, and gas from Hides provided power for the giant Porgera gold mine. In September 1993 Barracuda Pty Ltd, a wholly owned subsidiary of MIM Holdings Ltd., and Chevron Corporation, the operator of the Kutubu field, signed an agreement to exploit the East Gobe oil field in Southern Highlands Province. In January 1994 Ampolex Ltd and Oil Search announced a significant discovery close by the South Gobi field. In December 1993 the government approved plans for PNG’s first petroleum refinery.

Although the PNG government has an equity (of up to 30 percent) in major projects, the sector is dominated by foreign-owned companies. Australian-based companies include CRA, BHP, MIM Holdings, Niugini Mining, Renison Goldfields, Ampolex and Oilsearch. Kennecott and Chevron are based in the United States, Placer Pacific in Canada, RTZ and BP in the Britain, and Metallgesellschaft, Degussa and Deg in Germany. A Minerals Resource Development Corporation holds the PNG government equity in mineral projects. The minerals and petroleum sector is highly capital-intensive and accounts for only 3 percent of formal sector employment. The government is encouraging overseas companies to make greater use of local materials and labor.

Mining and petroleum companies have been required to submit comprehensive environmental plans before receiving government approval for projects. The main concerns are the effect (particularly the discharge of waste) on the ecology of the area, and the physical and social impact on the subsistence and commercial activities of the local people. While most companies have lodged environmental plans there is evidence that some are evading the provisions of the government’s environmental legislation. In some projects the local people have expressed considerable concern about damage being done to their physical and social environment.

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