The Marape government began by making several amendments to the Mining Act and the Oil and Gas Act in 2020. One amendment to the Mining Act granted the government the power to reserve lease renewals for state-owned companies. Amendments to the Oil and Gas Act included granting the Minister of Petroleum the right to refuse a Petroleum Development License and to impose a ‘minimum expected level of return’ on any existing developer. These changes have concentrated power in political hands.

The mining amendment enabled the government to renegotiate the terms of the Porgera gold mine when the developer Barrick Nuigini Limited’s (BNL) special mining lease expired in 2020. Prior ownership of Porgera was split between BNL (95 per cent) and the PNG government (5 per cent). The government renegotiated a larger stake of 51 per cent, of which it will pay 36 per cent to BNL. It is hoped the mine will resume operations soon, with an agreement between BNL and the government signed on 30 March 2023.

Porgera set the basis for other project negotiations, particularly the Wafi-Golpu copper-gold mine. Wafi-Golpu is obtaining a special mining lease after a memorandum of understanding was signed between the government and the Wafi-Golpu Joint Venture. Through Kumul Mineral Holdings, the government has negotiated a 30 per cent stake — and will borrow to pay for it. This loan will add to state-owned enterprise debt, which is not listed as official government debt but which the government guarantees. High state-owned enterprise debt led the International Monetary Fund to categorise PNG as at high risk of debt distress last year.

With liquefied natural gas (LNG) projects, the government has negotiated an additional stake in the PNG LNG project, which started production in 2014. The project is jointly owned by Santos (42.5 per cent), the project’s developer Exxon Mobil (33 per cent), the PNG government (19.6 per cent) and JX Nippon Oil and Gas Exploration (4.7 per cent). Santos has agreed to sell 5 per cent of its equity to the state-owned Kumul Petroleum Holdings for US$1.4 billion. But Kumul Petroleum Holdings has found it difficult to secure financing from volatile financial markets and high interest rates, and has sought an extension.

Another LNG project is Papua LNG, with gas wells in the Gulf Province. The project is likely to reach a Final Investment Design (FID) stage in 2024. Papua LNG is jointly owned by the developer TotalEnergies (40.1 per cent), Exxon Mobil (37.1 per cent) and Santos (22.8 per cent).

The government is expected to increase its ownership of Papua LNG when it exercises its full back-in right (the amount of equity allowed to the State by law) of up to 22.5 per cent at the FID. In 2021, Kumul Petroleum Holdings also acquired an additional 7 per cent equity from TotalEnergies’ shares in the project. This could bring total state equity to 29.5 per cent.

Though Marape’s ‘take back PNG’ policy delayed project timelines — particularly for Papua LNG and the Porgera and Wafi Golpu mines — it has not deterred investors. This is partly because Marape has not altered the resource sector’s fiscal regime.

Yet the Porgera experience shows resource negotiations will not be expedited even if these projects are significant sources of government revenue and export earnings. These delays have not helped investors profit when commodity prices were high, nor have they helped the government’s struggling revenue in recent years.

Another issue is how the government chooses to spend the dividends it receives from resource projects. In 2015, PNG passed legislation to create a sovereign wealth fund (SWF) comprising two funds. The first, a stabilisation fund, is designed to receive half of all resource taxes and three quarters of resource dividends. The second, a savings fund, would receive the remainder of resource dividends. The SWF is yet to become operational, pending the appointment of a board and staff. Similar funds in the past have not lasted as balances were drawn down quickly to repay domestic debt and increase government spending.

PNG’s holding companies for mining and petroleum assets have become quasi-SWFs. The PNG Extractive Industry Transparency Initiative reports Kumul Mineral Holdings has not paid any dividends to the government. Further, Kumul Petroleum Holdings only paid K198.2 million (US$61.3 million) annually, despite receiving on average K889 million (US$275 million) annually from PNG LNG since 2015.

Withholding PNG LNG payments has enabled Kumul Petroleum Holdings to seek higher stakes in future LNG projects and fund government spending. But such investments violate a primary objective of the SWF — to ensure intergenerational equity.

Marape’s push to secure higher state equity has delayed many resource projects, leading to missed opportunities during periods of high commodity prices. This will prove costly in the long term. It is unlikely that dividends from equity secured in mining and petroleum projects will be managed well, given the poor accountability of state companies and the government’s reluctance to invest in its SWF. These factors risk constraining long term development.

Maholopa Laveil is the FDC Pacific Fellow at the Lowy Institute, currently seconded from the University of Papua New Guinea.