Papua New Guinea has mineral and petroleum deposits today because of geological events which took place millions of years ago. Petroleum is the result of the compression, over millions of years, of the remains of marine life which accumulated on the sea floor. Covered by deposits of sand and material from volcanic eruptions, it was then trapped under layers of solid rock. It did not become available to humans in any quantity until the advent of drilling technology.
Although some of the minerals, for example gold, eventually came up to the surface of the land and could be collected from the gravel of river beds, the use of metal was not a tradition among the indigenous people in PNG. However, there was traditional quarrying of rock and minerals for implements, weapons and dyes.
The first prospectors were foreigners who arrived only last century. The first gold was found (on Sudest Island) in 1880. Prospecting and exploring continued from then on. In the 1930’s an alluvial gold mine was started at Wau, and gold was dredged there until 1965.
As the exploration of the country continued, the sophisticated methods of mid-20th century geologists enabled them to find valuable minerals in the hard rocks that exist both as outcrops throughout the land and deep within the earth. Gold was still the metal that attracted most interest, but copper and silver in large quantities are as valuable as smaller quantities of gold. Often the three are found together.
The first large modern mine started producing income at Panguna, on Bougainville island, in 1972, eleven years after the first report of possible deposits there and eight years after the beginning of initial exploration. Gold, copper and silver were mined from Panguna until 1989, when agitations by the local people caused its closure. Until that time it was a very profitable mine, accounting for 10% of the gross domestic product and 36% of the total export earnings of the country, and its closure was a major loss.
However, since then a number of other large mining projects have become established in PNG and an oil industry has begun. The receipts from mining, together with those from petroleum, still constitute the bulk of PNG’s export earnings (over 70%) and make up over 20% of GDP. Over the past twenty years the government’s income from this sector has derived from direct profits from its share holdings, together with the licence fees charged and the taxes payable by companies, employees and land-owners who have received compensation payments.
The country also receives benefits in kind, in the form of road-building and other infra-structures, for example, health services and schools in the local area.
Apart from Bougainville, there are four main mining sites in PNG. Ok Tedi, in Western Province, started as a gold mine in 1984 and began extracting copper in 1987. It is now a major world producer of premium copper concentrate. Misima, on Misima Island in Milne Bay Province, had a history of alluvial gold mining that went back to the early years of the century and had underground mines before the war. The modern mine, however, came into production in 1989. It produces both gold and silver. Porgera, in Enga Province, one of the world’s largest gold mines, started production from an underground shaft in 1990 and continues with both underground and open pit mines, processing 10,000 tonnes of ore per day. The latest gold mine, Lihir, on Lihir Island, in New Ireland Province, expects to begin operations in the near future.
The Department of Mining and Petroleum has been centrally involved in all developments in this major wealth-creating sector of the economy since Independence in 1975. It is the Minister who, acting in Cabinet, determines the policy framework, embodies it in legislation and is responsible for administering it. Advised by the Department, the Minister makes the decisions on which the continuing development of the industry depend.
The Department is also responsible for managing the latest extractive industry: petroleum. Unlike gold, the presence of oil had been known by some local residents prior to its discovery by twentieth-century oil explorers and, in areas where it occasionally occurred on the ground surface, it had been used by them as an emollient. In 1987 Chevron Niugini discovered oil near Lake Kutubu in Southern Highlands Province, deep in the heart of the country, and since then a major development has taken place. The first production of oil was in 1992. In 1995 the 100 millionth barrel of crude oil had been pumped from Kutubu Oilfield and sent down a pipe-line which passes the whole length of Gulf Province to the terminal 40 kms out to sea in the Gulf of Papua. More exploration has been taking place in the same general area of Kutubu and along the pipe-line and more discoveries have been made, in particular of natural gas deposits at Hides. Development of PNG´s next petroleum project is well underway at Gobe to the southeast of the Kutubu Oilfield, and construction should take place during 1996.
Apart from the obvious financial benefits to PNG in generating foreign income. PNG´s mining and petroleum projects play a major role in promoting education, training, services, infrastructure, employment and business opportunities to communities who live in remote locations that previously had little or no government services or economic activity.