BRIEFING TO THE CHAMBER OF MINES & PETROLEUM

Petromin PNG Holdings Ltd was set up by the current government to maximize the nation’s ownership of mining and petroleum resources as well as the gains from the commercialization of these resources.
In a presentation to the Chamber of Mines and Petroleum last week Wednesday at the Crown Plaza, Managing Director & CEO of Petromin Mr Joshua Kalinoe, CSM, CBE said the Somare government in an effort to maximize both ownership and economic gains for Papua New Guineans made a conscious policy decision to establish an oil, gas and minerals company that would drive this agenda.
He told the Chamber members present that this policy decision was based on an Independent Advisory Committee Review report titled, “Treatment of State Equity in Mining and Petroleum Projects,” by Mel Togolo, Dr Ila Temu, Dr Lawrence Kalinoe, Mr Michael McWalter and Mr Greg Anderson.
One recommendation of the report was that “…the State participation should be managed by a newly formed state-owned mining and petroleum holding company (newco) that will compliment the roles of the existing organizations: the Independent Public Business Corporation (IPBC) and the Mineral Resource Development Company (MRDC).’’
In keeping with the policy decision regarding economic maximization and greater Papua New Guinean ownership, the Government expanded the scope of Petromin to include participation in the development (exploration) and production (commercialization) of mineral and petroleum interests either wholly or in partnership with other resource development partners.
The other reason for establishing Petromin was to over come the principle of Negative Pledge when investing in billions of kina worth of resource projects.
Mr Kalinoe said that when the State participates in commercial investments worth billions of kina, the State would borrow from international financial markets.
Even though the borrowing is purely commercial in nature, because the State has outstanding sovereign loans with financial institutions such as the World Bank and the Asian Development Bank, any further borrowing by the State, regardless of their nature, must be first sanctioned by these institutions.
Under the Negative Pledge principle these institutes have the right of refusal for PNG to borrow, even if the borrowing is related to a commercially viable project. This became evident from the now shelved PNG Gas pipeline project.
Mr Kalinoe said Petromin is an operational company established under the Companies Act 1997, with specific powers to be the State Nominee in mineral, oil and gas projects.
“Petromin is set up and mandated to hold State interests in the mining, oil and gas projects, including downstream processing of natural resources and related investment activities as well as to acquire and hold future State interests in petroleum and minerals, both upstream exploration and production and in any value added downstream processing projects.”
“It provides the only hope for Papua New Guineans to add value to their oil, gas and mineral resources.
“I therefore urge the industry and other stakeholders to work together with Petromin for the mutual interests of all parties, including the Chamber members,” Mr Kalinoe said.
The briefing was organized by the Chamber of Mines and Petroleum.