Economic Analysis and Benefit Stream Analysis
Approach
SIA & Development aims to maximise sustainable development through the promotion of effective and
practical solutions in the large-scale resource projects. Internationally, the company maximises the use of
local consultants and local organisations, while ensuring high quality outcomes in line with current
international best practice. This approach builds local capacity and strengthens local relationships
without compromising quality or effectiveness, and has proven to be cost effective.
Mike Finlayson has pioneered Benefit Stream Analysis in PNG’s mining and petroleum industries. Benefit
Stream Analysis focuses on the project area and includes the identification of benefits that accrue from a
project, along with the estimation of the size and distribution of these benefits. Benefits are not
restricted to financial payments but include public infrastructure and other project grants, benefits from
local employment and local business development, and indirect benefits arising from an increase in the
level of local economic activity.
Benefit Stream Analysis needs to be integrated within SIA, and typically includes assessment of the
relative change in income levels for different stakeholder groups and equity considerations. Benefit
Stream Analysis should be undertaken prior to ‘development forums’ for new mines or petroleum
projects in PNG to help ensure consideration of issues around equity and sustainable development.
In addition to benefit stream analysis, a range of other economic assessments and economic studies have
been undertaken for both the private sector and donor community.
Recent experience
Examples include:
Country
PNG
Project
Wafi Golpu Project
Client
Morobe Mining Joint Venture (a joint venture between Harmony & Newcrest)
Date
June - October 2012
Input
1 month
Position
Services
Economist
Completed a Benefit Stream Analysis of the proposed Wafi Golpu copper and gold mine
in Morobe Province. The analysis described the type and allocation of direct and indirect
benefits of the mine, drawing on production, revenue, employment and other forecasts
prepared as part of the mine prefeasibility study. The analysis included:
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An assessment of national benefits;
An assessment of provincial benefits;
An assessment of local benefits;
Analyses of personal income levels and inequality;
A sensitivity analysis (indicating the affect of changes in production, prices and
other variables);
A review of benefit management experience in PNG’s mining sector; and
Recommendations to improve the allocation and use of mine-related benefits.
Country
PNG
Project
Gulf LNG Project
Client
InterOil
Date
June - August 2011
Input
2 months
Position
Services
Economist
Engaged by InterOil to prepare a Benefit Stream Analysis of the Gulf LNG Project, which
aims to commercialise the Elk-Antelope resource through production of approximately
530 billion Btu of LNG and 9.4 million barrels of condensate per annum for a period of 30
years.
The Benefit Stream Analysis included:
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An assessment of national benefits;
An assessment of provincial benefits;
An assessment of local benefits;
A review of the impact of large-scale resource projects in PNG;
Detailed analysis of personal income levels, LLG revenue, provincial revenue, and
the impact of abandonment; and
Detailed recommendations in regard to the allocation and management of
benefits.
The recommendations focused on reducing inequality, prioritising and promoting local
development and increasing the sustainability of project benefits. The report and
recommendations were presented in detail to the Department of Petroleum & Energy, as
a precursor to recommendations to take to the development forum for the project.
Country
PNG
Project
Sustainable Development Policy for the Mining Sector
Client
Department of Mining (World Bank funded)
Date
March - November 2002
Input
6 months
Position
Services
Economist
Part of a multidisciplinary team engaged to provide advice on the preparation of a
sustainable development policy for the mining sector in PNG. Responsible for:
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Undertaking a detailed analysis of mining-related benefits for the Ok Tedi, Porgera,
Misima and Lihir mines (including financial payments to national, provincial and
local level governments, financial payments to landowners, wage payments, tax
credit expenditure and other development support);
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Forecasting benefits and their distribution in each of these mines between 2002
and mine closure; and
Providing recommendations to improve the allocation and use of mine-related
benefits.
The results of the analysis were presented at a mining conference, held in Madang in late
2002. Although a discussion paper was prepared on a sustainable development policy
and a sustainability planning framework for the mining sector, it was not advanced as a
policy submission until early 2011, when it is being taken forward as part of the proposed
amendments to the Mining Act.
Country
Sri Lanka
Project
Sri Lanka Community Forestry Program
Client
Forest Department (AusAID funded)
Date
October 2009 - January 2010
Input
2 months
Position
Services
Team Leader
Engaged by AusAID to (i) conduct a feasibility assessment (including cost benefit analysis)
of a community forestry program and assess the impact of the program in terms of its
conservation value and reduction in poverty, and subject to the analysis (ii) design a new
program of assistance with Sri Lanka’s Forest Department to extend the program for a
further five years.
The Feasibility Assessment concluded that the approach is successfully addressing the
leading causes of deforestation and forest degradation in the dry and intermediate zones,
enhancing the livelihoods of participating communities and contributing to a reduction in
poverty. Furthermore, the community forestry approach provides a range of
environmental and social benefits: the approach empowers communities and provides a
mechanism for a range of government agencies to provide technical assistance and
material support to help increase incomes and improve social infrastructure. The return
to labour provides sufficient incentive for households to participate in income-generating
activities, and the increase in income should reduce the number of poor households at
each site. The estimated additional income exceeds the poverty line in the dry and
intermediate zones (ie. the amount of income required to meet minimal nutritional
intake for a family) and can therefore be expected to contribute to poverty reduction.
Overall, the proposed program is economically viable, generating a 20% investment
return, and the risks are considered manageable.
Country
Australia
Project
Indigenous Economic Development Study
Client
Reconciliation Australia and Newmont Mining Limited
Date
February - July 2006
Input
2.5 months
Position
Services
Team Leader
Engaged to lead a study aiming to increase economic opportunities for indigenous
communities in remote areas of Australia. Discussions were held with Newmont,
government, research organisations, local businesses and community leaders, and
recommendations made to enhance Aboriginal business opportunities at mines near
Wiluna (WA) and Charters Tower (Qld).
Country
PNG
Project
Benefit Management and Sustainable Development
Client
Oil Search Limited
Date
April/May 2011
Input
4 weeks
Position
Services
Economist
Part of a small team engaged to:
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Review the benefits from oil production in PNG in the past and assess the
effectiveness of the institutions managing these benefits;
Forecast future benefit streams for both oil and gas production; and
Provide recommendations to improve the management of benefits, to enhance
their contributions to social and economic development within the project area.
Recommendations focused on the provision of support for the National Government’s
economic corridor initiative for the petroleum area, an extension of Oil Search’s role
under the tax credit scheme, and increased focus for other discretionary support on
local level governments, including capacity building and partnering with Special Purpose
Authorities operating under different local level governments.
Country
Philippines
Project
Tampakan Gold-Copper Mine Feasibility Study
Client
Indophil Resources
Date
March/April 2006
Input
2 weeks
Position
Services
Economist
Economist engaged by Indophil Resources to undertake a preliminary economic impact
assessment – focusing on benefits to government at each level, local communities,
employees, suppliers of local goods and services, and indirect benefits to the economy –
over the life of the proposed Tampakan Gold-Copper Mine in the southern Philippines
(prior to the buy-in from Xstrata).
Country
PNG
Project
Bougainville Road Maintenance Project
Client
AusAID
Date
August 2004
Input
1 month
Position
Services
Economist
Engaged by AusAID to participate in the design of a road maintenance program in
Bougainville. Completed financial and economic analyses and described the development
situation, performance measures and the expected impact of the project on poverty
reduction.
Country
PNG
Project
Lower Ok Tedi West Bank Road Project
Client
Ok Tedi Mining Limited
Date
December 2004 - January 2005
Input
1 month
Position
Services
Economist
Economist engaged by Ok Tedi Mining Limited to prepare (i) a Cost Benefit Analysis for a
proposed road along the west bank of the lower Ok Tedi River, and (ii) a funding proposal
for construction of the road.
Country
PNG
Project
Ok Tedi Development Foundation
Client
Ok Tedi Mining Limited
Date
October 1999
Input
3 weeks
Position
Services
Economist
Economist contracted to Ok Tedi Mining Limited to conduct an analysis of benefit streams
since mining commenced, and provide an analysis of the feasibility of establishing a
permanent trust fund to help preserve, once mining ends, the levels of income and social
services that local residents are accustomed to. Responsible for:
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Conducting an economic analysis of benefit streams (throughout the life of the
mine);
Developing a model to help forecast trust funds, and hence, annual trust
expenditure; and
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Forming recommendations to improve access to economic and social services in
the mine-affected area.
Country
Philippines
Project
Philippines Land Reform Support (Nucleus Estate - Outgrower) Project
Client
Department of Agrarian Reform (World Bank funded)
Date
April - June & August - October 1992
Input
6 months
Position
Services
Financial Analyst/Survey Specialist
Part of a multidisciplinary team responsible for designing farm development plans for
existing rubber plantations and for small-holders as part of the support services of the
agrarian reform program. Phase I involved the collection of information and analysis of
alternatives to assess the feasibility of developing rubber on an estate and/or smallholder basis in the target provinces (Basilan, Cotabato and Zamboanga del Sur). Phase II
involved the detailed formulation of farm development plans and overall project design.
During Phase I, responsible for the design, implementation and analysis of a socioeconomic survey to assess the current socio-economic status of small-holders in the
target areas and to assess the willingness and capacity of small-holders to increase tree
crop production. The survey included detailed household questionnaires and a series of
barangay meetings to harness ideas from the wider population. Worked with a local NGO
during questionnaire design and implementation.
During Phase II, assessed the financial and management capability of the rural
cooperatives who have or are about to take on ownership and management of existing
plantations. Working closely with these cooperatives, formulated detailed development
packages involving rubber planting, maintenance of rubber and other tree crops,
infrastructural development and management training support, each tailored to the
needs of the individual cooperative. In addition, designed financial packages for each
cooperative, and quantified each cooperative's role in the nucleus estate/small-holder
relationship. Completed financial and economic analyses of project components and the
whole project to conform with Philippine Government and World Bank requirements,
and helped prepare the final report.
Country
PNG
Project
Solwara 1 Mining Project Feasibility Study
Client
Nautilus Minerals
Date
September 2008
Input
2 weeks
Position
Economist
Services
Economist engaged by Nautilus Minerals to prepare a brief economic analysis of the deep
sea ‘Solwara 1’ mining project as part of the Environmental Impact Assessment.