Rowan Callick, Asia-Pacific Editor
The last big throw of the dice for Papua New Guinea's beleaguered economy, described at an investment conference in Sydney yesterday as "in deep depression", is to push through the $6.5 billion gas pipeline to Brisbane by December 19.
The PNG Minister for Petroleum and Energy, Moi Avei, said yesterday: "We have 50 per cent of the customers signed up and are assured of the balance" by the time a series of meetings that will decide the fate of the project start.
Some customers appear to be exercising brinkmanship, waiting for the price to be cut to build minimum demand for the go-ahead.
The PNG Prime Minister, Michael Somare, said the project was his government's No1 priority.
He said his government would consider selling its 18 per cent of Oil Search as part of its effort announced in last Thursday's budget to raise $80 million through privatisations in 2003.
Sir Moi added that it would only make the sale once the pipeline went ahead and the share price consequently went up. Oil Search stands to gain not only from its 37 per cent of the gas project but also from its access to the increased oil flows resulting from the reduction of pressure constraining its oil fields that would result from extracting gas.
Sir Michael told the conference, organised by PNG's chamber of mines and petroleum: "The 1990s could be seen as a decade of missed opportunities for the development of PNG's mineral sector and the wider economy and society."
Expectations were exaggerated, he said, and "there was a tendency to mortgage our future earnings".
The PNG Government is reviewing its statutory right to take up equity in all resource projects.
Sir Moi said there was "some concern from investors that we are coming in cheaply" at the level of the sunk costs. He said the government might pass on its equity entitlement to landowners because "they own the land".
Sir Michael, who is going on to Canberra for informal talks with Prime Minister John Howard, said that immediately after the budget reduced some resource taxes, "two or three major companies were inquiring" about investing.
Greg Anderson, executive director of the chamber organising the conference, which was well attended by miners and administrators from PNG and Australia but less well by investment bankers, said the sector would generate 80per cent of PNG's export receipts in 2002.
He said the sector had had good interaction with the government during the framing of the budget and applauded measures to encourage investment. "But our main disappointment is that it has kept the mining levy, which was being phased out," Mr Anderson said.
Mike Manning, executive director of the Institute of National Affairs in PNG, said the government should make reducing interest rates its top priority. The rate stands at 15 per cent or more for business borrowers.
"We are in deep depression - not recession," he said.
Employment has declined during the past decade, while 800,000 people have become of working age."
But Sir Michael said he expected the PNG economy to grow by 1.8 per cent in 2003 after four straight years of decline.
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