Friday, August 27, 2010

Delays to cost PNG more

By ERIC TAPAKAU, Post Courier
WHEN our debt from international donors is being significantly reduced, Papua New Guinea is set to crawl on its knees to repay overseas investors if the ongoing landowner issues in mineral and petroleum resource areas are not sorted out once and for all.
This is a warning from a highly placed expert in the mining and petroleum industry who said penalty fees would amount to billions of dollars and any negative impact on the projects emanating from landowner issues would also badly tarnish the good name of the country, especially at a time when PNG was enjoying a reputation globally as a “good investment destination”.
“If these projects do not meet their deadlines, there are clauses in their agreements that they will be liable to pay penalty fees and the State will also be liable to pay some of those fees,” he said.
He said currently PNG was in the process of hosting two multi-billion projects in the Ramu nickel/cobalt project and the PNG LNG Project but both projects had their share of landowner issues.
But he is not alone as Prime Minister Sir Michael Somare also fears that PNG will be liable to repay billions of dollars in penalty fees to the Chinese-owned Ramu NiCo and its parent company China Metallurgical and Constructions Company Ltd if the Ramu project does not meet its schedules.
He said this earlier this year when highlighting the fact that Ramu was an important project for the country.
Ramu NiCo said in an advertisement yesterday that it would consider retrenching its workers after the National Court refused to lift the injunction preventing Ramu NiCo from constructing the offshore component of the project’s deep sea tailings placement system.
The company has so far spent $US1.2 billion of the total $US1.4 billion on construction and construction work is ending with production set to resume by the end of this year.
Ramu NiCo is understood to be losing K7 million daily when the project is delayed due to the court challenge on the DSTP.
“As construction is winding down and most of the equipment has been installed, one real option is to now place the project on a care and maintenance basis, postpone the operational works and adopt retrenchment measures, even though this would be devastating for our workers and their dependents and for the landowners, other community members and business partners,” the company said in a statement.
“Given this, Ramu NiCo will do everything it reasonably can to minimise the losses and the first action will be to urgently appeal this decision to the Supreme Court.”
The company said it would also discuss the present situation with project stakeholders before taking further action.
The PNG LNG project also faces similar situation with construction phase set to be completed by 2013, all stakeholders including the State will be liable to pay hefty penalty fees if first gas is not delivered by 2014.

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