PORT MORESBY – On the first Thursday in June, soon after Oil Search chief executive Peter Botten addressed the 244th Sydney Mining Club forum over luncheon in Australia, a mother and her two sons drowned in the remote South Fly District of Papua New Guinea’s Western Province.
The tragedy which took the lives of the mother and her child and an infant occurred after a boat they were travelling in with relatives capsized in rough waters at the mouth of the Karu River. They left behind the father, a Port Moresby-based police officer, and three older siblings.
The family travelling in the ill-fated boat was on its way to the village of Sepe on the West Kiwai coast, escorting for burial the body of a deceased police officer from Port Moresby.
The tragedy exposed the sad reality of this remote part of Papua New Guinea.
The geographically vast Western Province borders with Indonesia and is the closest part of PNG to Australia but that is where the proximity with its neighbours ends and the disparity begins.
Not that this had anything to do with the eminent Mr Botten or the operations of Oil Search, nor the Australian government and people.
But these two unrelated incidents that played out hours apart on Thursday 6 June do denote an urgency to rethink the relationships on both sides of the Torres Strait.
And they exposed fundamental flaws in the drawdown, utilisation and distribution of benefits and tax credit schemes for resource owners and people of the provinces that host various mining and other resource extraction projects in PNG.
The big question is, where did all the money go?
It’s a question worth asking when host provinces continue to lack the most basic physical and transport infrastructure, andwhen social services are at deplorable levels.
The Western Province is a good case in point. Though abundantly rich in marine life, wildlife and local food, it is locked away from the rest of PNG with no road access from the outside.
The rest of PNG is only accessible by air or by the more risky open sea crossings that take days often in treacherous conditions before the closest landing point in the east, at Kerema, is reached.
From there, it is a very long and rough ride by truck on the Hiritano Highway to Port Moresby.
The capital of Western Province is Daru on the coast but the largest town is Tabubil in the deep hinterland, where the minerals are.
The 2011 census showed there were something more than 200,000 people in the province, the average size of a household being 6.4.
The major economic activity is the Ok Tedi copper, gold and silver mine, forecast to shut down in 2030. The mine, established by BHP in the 1980s, has been the subject of considerable litigation by landowners in respect of both environmental degradation and disputes over royalties.
BHP eventually threw in the towel in 2002 and transferred its 52% equity to the PNG Sustainable Development Program (PNGSDP), a fund set up to operate for the benefit of the Western Province people and PNG as a whole.
By 2017 it had grown its long term fund to $1.4 billion and it continues to support its community obligations.
The mine is now operated by Ok Tedi Mining Limited (OTML), a 100% Papua New Guinean company with a 67% direct government shareholding and a 33% interest held by the people of Western Province.
The company says it employs over 2,000 people and in 2018 provided a K100 million dividend to the government as well as being a major foreign currency contributor to PNG. It also injects many millions of kina into social and infrastructure projects, although these are spread thinly over PNG and have not had a major impact in Western Province.
The big challenge will come after 2025, or even earlier if OTML is forced to advance its shutdown. The Western Province economy is almost entirely mine-dependent and it can be foreseen that most foreign and national businesses will exit promptly followed closely by many government services leaving the province without an economic base.
This will leave the national government responsible for a province saddled with environmental issues, obsolete infrastructure and abandoned public facilities.
Fortunately, to the east, it is expected that Gulf Province will soon host the massive A$14billion Papua LNG project, a boon for the least developed province in PNG and perhaps a cloud with a silver lining for Western Province.
Horizon Oil chairman John Humphrey said last November that Western Province also has condensate rich gas resources in four fields that lie to the south of ExxonMobil and Oil Search’s P’nyang gas field and there seems some prospect of interlinkages with the Papua LNG project.
Oil Search’s Botten had assured the miners’ forum that his company’s prospects in PNG are safe and promising, allaying initial fears of a hostile new prime minister and government up north.
Botten reportedly told the forum he did not expect to make significant new concessions on the recently inked Papua LNG gas deal struck with the government.
As for Gulf Province, a comprehensive 15 year development plan to establish a special economic zone at Ihu rides on the successful development of Papua LNG.
Business Advantage PNG reported that the Ihu zone will centre on the Kikori District and include free trade zone, petroleum park, industrial zone, technology park, forestry park, marine park, deep sea port, airport, township and resorts, and a government and administration area.