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a pipeline

Papua New Guinea prime minister Peter O’Neill tells Jacopo Dettoni about the government’s ambitions for new major natural gas and mining projects in the next few years, and how the country will use the returns to diversify its economy and ensure sustainable growth. 

Q: Exxon and Total are developing a new major liquefied natural gas [LNG] facility in Papua New Guinea. What is the vision for the future of the natural gas industry in the country?  

A: Papua New Guinea has some of the largest natural gas projects in the world by far. We raised $19bn between 2005 and 2007 for our first LNG project [and] we delivered it well before time and under budget. We have a very good track record of low-cost LNG production in our country and today we are delivering – beyond expectations – much larger quantities of LNG to our markets in China, South Korea and Taiwan. A second project is now being developed by Total and Exxon.

We will go to the market again [the price tag is above $10bn], and I know the market reception will be quite good. [International investors] will be able to help us finance this second project. We will deliver it at low cost and on time as we did it with the first one. We expect the first gas exports between 2021 and 2022.

We believe demand for LNG is there and growing, with countries in the region such as China and South Korea starting to change their energy configuration from heavy fossil fuel dependence to LNG and solar and hydropower, which is a mix that will continue to propel growth of LNG in that market.

We have seen how resource-rich countries, in the region and globally, have made mistakes with their overdependency on [their resources]. We are trying to transform this [oil and gas, and mining] investment into agriculture and tourism that is sustainable for a long period of time. This is where we have the greatest potential.

Q: Another major project in the pipeline is the $2.8bn Wafi-Golpu gold and copper mine by Australian Newcrest Mining. When is construction going to commence?

A: We expect a mining agreement to be signed well before the end of this year, and construction to kick off in mid-2019. We expect it to become a world-class gold and copper mine – in fact, I’m told reserves are much higher than has been indicated to the market.

Our aim is to make sure all these developments are environmentally friendly. We have had experiences in the past where some of the environmental damage by the project in other mines has affected our communities [the government is pursuing a legal case against mining major BHP Billiton for alleged environmental issues at the Ok Tedi gold and copper mine] and our government wants to develop this in an environmentally friendly way, so that we can sustain the legacy of our own biodiversity within our rainforest and make sure communities are not affected.

Q: Are you still planning to issue a first international sovereign bond despite some recent negative views by credit rating agencies?

A: We are very well advanced in issuing a sovereign bond in the coming months. We are willing to raise anywhere between $500m to $1bn. It’s a 10-year bond; let’s see how the market reacts. From early indications, we have had some very positive responses from many of the people that are going to take up the issue and we are looking forward to concluding it soon.

The slight downgrade [by Moody’s] is just an indication of the effects of the recent earthquake – and, of course, of the temporary shortage of foreign currency hampering growth going forward. But if it takes note of the potential and upside we have coming up in the economy, it will see an economy growing at a very steady pace despite all the global challenges and downturn in commodity prices.

Our growth has been averaging about 3% per annum. Globally, that’s something not too many countries can boast. Despite the downgrade, the issue will be well accepted [and] we believe it will be oversubscribed.

This article is sourced from fDi Magazine
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