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**** Statement - Landowner Issues in Bougainville, LNG Provinces & Ok Tedi ****
August 17, 2016
I wish to make a statement in respect to my commitment to this honourable house last week that I intended to announces some of the decisions that our Government has taken in respect to the relationship that our Government has with landowners, the provincial governments and the resource development in the country.
These decisions will have a direct bearing on future resource developments that will take place in the country.
The decisions that we have taken are because of the direct interest that the Government has in these particular projects.
Land, and its connection our people is at the heart and soul of our country and our communities.
Our land gives us life and supports livelihoods, it gives us a place for communities to live, and land ownership provides certainty for our children and their children.
But too often in the history of our country - our landowners have been let down.
Our landowners and their communities been made to be bystanders as their ownership has been taken away from them.
This includes both foreign and national companies, and this has been supported by successive Governments.
However, Mr Speaker, our Government has committed itself to empowering our people – and this commitment is embedded in our Alotau Accord when we formed Government in 2012.
We are committed to giving direct participation in resource developments in our country so that our landowners can take ownership, and build capacity in order to sustain their own livelihoods and their communities.
I wish to announce to the House today a series of decisions by our Government that relates to the interests of landowners and the people specifically in Western Province, in the provinces where LNG and oil are being produced, and the Autonomous Region of Bougainville.
These decisions are milestones in the history of our country, they will continue to empower and give confidence to many landowners and communities throughout the country.
The first of these Mr Speaker, concerns the direct equity in Ok Tedi Mining Limited.
This decision gives Fly River Provincial Government and Mt Fublian Landowners more say in the development of that mine.
The National Executive Council has endorsed the decision of our Government to transfer 33 per cent, one third of Ok Tedi Limited equity, to the people of Western Province - including landowners, affected villages and the Provincial Government.
This is a totally different approach to the past where the people of Western Province only received dividends of up to 6.1 per cent that was held by the State.
Today we are providing direct equity participation for the people of Western Province and the landowners, and this will further allow for participation at the management and the board level.
The people of Western Province to come to their own agreement about the distribution of the shares among themselves between the Provincial Government, the landowners and communities surrounding the mine.
It has been agreed in Cabinet that the shares will be held in trust by the Mineral Resources Development Corporation, through their managing of the mineral resources Ok Tedi and the mineral resources Star Mountain on behalf of the provincial Government and the land owners as well.
Mr Speaker, the value of the resources in Western Province is enormous and the people of that province and communities around the mine must benefit meaningfully from these resources.
When we took over the mine it was worth less than 500 million dollars.
The current assets of Ok Tedi will be valued at over 3 billion US dollars in twelve months time.
I note the former chainman of that mine has made a public advertisement today, but our Government is not going to engage in a war of words and we will allow the courts to make those determinations.
But one thing is very clear, after all of these years of operating this mine, under BHP and under PNG Sustainable, it is evident that our people and our provincial governments have received limited benefits and for that reason we are making this decision.
Since taking ownership of the Ok Tedi mine, and through new world class management, we have seen a total turnaround.
Mine equipment has been upgraded, and the way the mine operates has changed, including better management of the environment making sure our communities can be safe, and improve their lives.
Because of the management, re-tooling and enhanced production processes, the mine’s efficiency has improved making it more profitable, and able to operate in a low commodity price environment.
The the commodity prices improve that will make the mine even more profitable in the long term.
In broader terms, these arrangements will see that the people of Western Province will have total assets, including the stake that they have in PNG Sustainable fund, valued at well over 2.4 billion US dollars.
Making them one of the richest provinces in the country.
I am hoping that through the landowners and the Provincial Government, that they will continue to manage these funds well for the benefit of future generations in the coming years.
We are aware of the issues that we have with PNG Sustainable, our Government will continue to fight for the rights of the people of Western Province.
Again I stress clearly, that our Government has no intention of taking over that particular fund for the people of Papua New Guinea.
That fund belongs to the people of Western Province.
They must have their say and they must take ownership of that fund and manage it themselves.
They must continue to do that and this is why we are in the court in Singapore, and I will allow the courts to make their decision.
But so far we have won every argument that has been presented to the High Court of Singapore, and we are confident that we will have a better outcome for the people of Western Province.
We are making these decisions giving close to 5 billion Kina back to the people of Western Province and this is a commendable decision that our Government has made for our people.
LNG Producing Provinces
In terms of the LNG and oil producing provinces, they are an important part of our economy.
This is now the Government trying to implement the decisions that the previous Government has taken including the distribution of equity and the benefits that are due to the people of Hela, Southern Highlands, Gulf, Central and Western Provinces.
As I said in Parliament last week, since the production of oil began in our country, our landowners and our provinces have received close to one billion Kina in benefits, but as you look into these provinces there is nothing to show for it.
We must have better management of these funds and we intend to work closely with the landowners and the Provincial Governments in ensuring that the every MOA that we have signed, every IDG grant that we have promised, every business development grant that we have promised, and all the commitments under the LBSA and the UBSA, we intend to honour.
These are done by various Governments since oil production began in the early 1980s, but we intend to honour every commitment that has been made.
Since the sale of the gas, we have now 135 million Kina in the central bank in royalties, 130 million Kina in development levies, and 200 million Kina in equity for these five provinces.
These funds are placed in trust accounts with the Bank of Papua New Guinea.
To dispel false information, that has been circulated by people with a political agenda and their own interests, I have yesterday directed our officials to travel up to the landowners and show them the bank statements with the actual bank balances in the accounts.
They will have no doubt whatsoever that their money is safe and in trust for their use.
The State has not mortgaged those funds, they are available and waiting for the clan vetting exercise to progress, and once that is done I have directed the Minister for Petroleum and Energy, and his department, to within 30 days after this Parliament rises, they must complete their clan vetting exercise.
After 30 days we will start distributing these funds that are rightfully due to the landowners, and rightfully due to the provincial Governments, and all the stakeholders that we have committed to.
The equity represents almost 2 percent of the project, which is free carry, and through the Umbrella Benefit Sharing Agreement which was signed in Kokopo in 2009, the Government at that time decided that we will give a further 4.27 per cent in Kroton, now Kumul Petroleum, as indirect equity in the PNG LNG project.
Under this agreement, the landowners and Provincial Government were to pay the State close to 1.1 billion US Dollars for 4.27% equity in PNG LNG.
The Hela Provincial Government took charge of raising those funds, but we are unable to conclude as the landowners continue to face challenges in arranging finance to fund the acquisition.
Govern current market conditions, where the oil price has collapsed from US$110 per barrel down to US$27, it is quite impossible for the landowners and Provincial Government to raise that money.
That is why NEC has approved that it will extend the time, that expired on the 30th of June, to be extended to 31st December 2016, so they can have the opportunity to raise more funds over the next few months.
We also decided that we would renegotiate the pricing given that the price of oil has dropped, so that it becomes affordable so that they are able to go and raise that money at a new discounted price.
This is only fair that they are given the opportunity to raise money to pay the Government for these shares that they are to receive.
Our officials, the landowners and the officials of the provincial government will work through it in due course I will inform Parliament when those agreements are put in place.
Bougainville Copper Limiter
In relation to Bougainville Copper Limited, there has been a great deal of discussion, some very unhelpful, some spiteful claims suggesting the Government was taking over the mine.
After many months of discussion, Rio Tinto has decided that they will gift its shares to the people of Bougainville and the people of Papua New Guinea.
That is the best outcome that we could gain.
This Government has shown a greater commitment to Bougainville that any other Government.
I want to tell the people of Bougainville that this position has not changed, and the Government will continue to work with the ABG, and the people of Bougainville, to achieve the best outcomes for them.
This includes the continued roll-out of services.
We continue to work to restore basic services, build more roads and other infrastructure and to work day and night with our friends in the ABG to advance the peace process.
The people of Bougainville have been through too much pain over the past thirty years, and should not face further frustration and confusion because of politics.
So today, I wish to make an announcement that should put to rest the rumours and misleading information.
This is an historical announcement that will affect every man, woman and child in Bougainville.
Rio Tinto decided to transfer, of its own accord, its 53.8 per cent controlling interest in BCL to ABG and the State.
Rio Tinto has transferred 17.4 per cent to the National Government, and the remaining 36.4 per cent to the ABG without costs.
These shares have now been transferred to the Government of Papua New Guinea, to our trustee under the Kumul Mineral Holdings Limited.
This was aimed by Rio Tinto to give an equal shareholding between the National Government and the ABG.
The National Government already has a 19 per cent direct interest in BCL, so with the 17.4 per cent it was intended to take this to 36.4 per cent, and the transfer of 36.4 per cent direct to ABG was meant to balance the ownership of that mine so that we can continue to work together.
The National Government wants to ensure that we make the right decision for the people of Bougainville.
We are aware of the pain and torment that the people of Bougainville have gone through, and the importance of land.
They felt very strongly that they were disempowered and they did not have participation in the mine itself.
Our Government is concerned about the health, wellbeing and prosperity of the people of Bougainville.
Today, Mr Speaker, we are announcing to this House that the Government of Papua New Guinea will transfer this 17.4 per cent, to the landowners and the people of Bougainville.
With this transfer, the people of Bougainville will own a combined shareholding of 53.8 per cent of BCL.
Mr. Speaker, this Government and this House knows that this is the right thing to do.
This will ensure that for the first time in history of BCL, the landowners will be given a direct say and direct participation in the operation of the BCL mine.
This will help to alleviate some of legacy issues of the past.
This ownership will also give landowners and the people direct control over environmental issues of any future mine development that will take place.
By transferring these BCL shares to the people we are further strengthening the confidence of Bouigainvilleans in the peace process.
We are serious about empowering communities on Bougainville, and we will continue to discuss how they want these shares transferred to them.
These funds must be utilised according to the wishes of the people of Bougainville for their community benefit.
In conclusion, the landowner issues that I have raised in relation to Ok Tedi, the PNG LNG project and BCL are very important for our nation.
They are important for our people, many of them are villagers who have nothing else but the land under their feet.
These are historical policy interventions by our Government.
Landowners will no longer be bystanders to activities taking place on their own land.
Their land is their heritage, their land is their livelihood and it is their future.
We must restore hope to our landowners who have been disadvantaged for many years.
Our landowners must be able to participate meaningfully, and benefit meaningfully.
They must have a say on how this land is developed and the activities that take place.
These issues I have raised today are not the end of the story.
Before this Parliament concludes, this Government will bring additional policy and legislative changes in the minerals, and oil and gas, and other resources sectors before the House.
These changes will continue to empower our people, enabling them to participate meaningfully in their resources development.
This is the commitment made in 2012 and we intend to fulfil that before we go to the polls next year.