Miners in shock as PNG plans to put landowners in charge of resources

The proposal by Mining Minister Byron Chan, the son of former prime minister Sir Julius Chan, has been tabled just as PNG -- which is often described as an island of gold in a sea of oil surrounded by gas is entering a massive resources boom.

The industry, which employs 30,000 people, provides 80 per cent of PNG's export earnings and is sending annual economic growth soaring, up to 9.7 per cent of gross domestic product last year and 11 per cent expected in 2011.

But analysts say any move to change the rules could derail the mining boom, which has led to most big mining companies in Australia move back into PNG in the past few years.

"This was totally unexpected, and is especially explosive in election year, with landowner groups expected to cheer and push for renegotiation even of existing projects," one analyst said.
Several planned LNG projects would also be affected.

Greg Anderson, executive director of the PNG Chamber of Mines and Petroleum, yesterday told The Australian: "This is playing with fire." He has sought an urgent meeting with Prime Minister Peter O'Neill, who took office two weeks ago, to hand a letter of concern signed by the leading players in the industry.

Mr Anderson said the industry would consider an advertising campaign against the bill, which he described as driven by "short-term populism and regionalism".

Those operating or exploring in PNG comprise many of Australia's, and the world's, top mining and oil companies, including Oil Search, Santos, BHP-Billiton, Rio Tinto, Newcrest, Xstrata Copper, Barrick, Harmony, Newmont, Vale, Nautilus Minerals, Allied Gold, Highlands Pacific, China's MCC, Marengo, New Guinea Gold, Petromin, ExxonMobil, Mitsubishi, Mitsui, Talisman, Sasol, Nippon Oil and InterOil.

Several of the companies approached by the The Australian declined to comment on the record, but all expressed concern at any change to existing laws.

A resources executive in PNG said the move would "increase sovereign risk and damage investor confidence".

A spokeswoman for Newmont pointed to a speech by Mr O'Neill last week, in which he said: "My government will give prominent attention to fast-tracking outstanding mining projects."

Mr Chan told Radio Australia: "The law says that the state owns everything six foot under, both on land and under the sea.

"We'd like to change that, possibly almost immediately, to revert the ownership back to the landowners, and relinquish the state from owning anything."

He said "the landowners will have more (direct) relationships with mining companies themselves, with the government standing as the regulator".

Two years ago, Mr Chan and his father Sir Julius strongly supported a private member's bill that sought a similar change.

The chamber of mines wrote to every MP strongly opposing it.

But the then government, led by Sir Michael Somare, disregarded the bill and it failed. Today, Mr Chan has the ministry, and the government has a sufficient parliamentary majority (Mr O'Neill won office by 70 votes to 24) to secure the votes needed to change the constitution.

The new government has previously enjoyed a comparatively calm transition, even though it will continue to face a legal challenge over the process.

Now, however, it is confronted by its first serious challenge. It is a massive one, and it comes from within.

Mr Chan's plan to give all resources wealth to the landowners will prove incendiary in the context of this campaign, unless Mr O'Neill steps in quickly.

Mr Anderson said that although Mr Chan claimed his proposal would not affect existing operations, it would be difficult to prevent landowners also claiming ownership. "How can you run a dual system?"Mr Anderson asked. "The present system works well, he said, and will continue to do so" as long as the national government has control over titles.

-The Australian