Botten urges better way to allot benefits

Business, Normal

The National, Friday 02nd December 2011

STAKEHOLDERS involved in the management and distribution of benefits to petroleum project area landowners need to work together for an effective and transparent system that delivers benefits to legitimate recipients.
Addressing the PNG Chamber of Mines and Petroleum seminar in Port Moresby yesterday, Oil Search Ltd managing Director Peter Botten said substantial direct and indirect benefits had been paid to governments (national and provincial); landowners and developers since oil production started in 1991.
“The PNG fiscal regime is balanced between government and developer share of the value,’’ Botten said.
“It is one of the most progressive in the world for landowner involvement.
“Better management of benefits is essential to deliver aspirations to the people of PNG.
“The regime is sound and sensible. Mechanisms for delivering benefits in an appropriate way need urgent work.’’
Botten said benefits from the petroleum industry between 1992 and 2010 included;
l    The national government through petroleum income tax, salary and wages tax, stamp duty, withholding tax and equity dividends – K9,453 million;
l    Provincial and Local Level  Governments – K820 million through Special Support grants, infrastructure grants, royalties, equity dividends, MOA grants and development levies
l    Recognised landowners (cash) – K393 million – through royalties, land compensation and rentals and equity dividends
l    Landowners (non-cash or indirect) K2,243 million–through em-ployment wages, landowner company contracts, tax credit projects, MOA grants, community development programmes, royalty and equity, community infrastructure and future generation trust funds.
“Material benefits have been delivered to the state, landowners and developers in PNG since the start of oil production.
“These benefits have not had the positive impact on the country that was expected.
“The money has been delivered – the issue is how the benefits have been managed. Industry stands to work with government and communities
to improve the ways to manage this value windfall,” Botten said.
Current benefits mana­gement stakeholders in-
­clude the Mineral Resources Development Co (MRDC); provincial governments and  local level governments.
; special purpose authorities (where they exist);  LNG/oil operations operators; Department of Provincial affairs; Department of National Planning and Rural Development ; Department of Finance; Treasury; Department of Works,IPBC- Kroton #2 (NPCP), and the Department of Petroleum and Energy.
Botten said benefits to the state and landowners had been large and were just about to materially increase with the development of the PNG LNG project.
He said while the PNG fiscal regime allowed for a fair distribution of resource wealth between the state and the developer and involves landowners in a world-leading way, there were questions as to how these benefits had been distributed and used.
Botten recommended several approaches as a way forward in resolving this issue, this includes;
•    The extractive industry transparency initiative (EITI), a global initiative to improve accountability and transparency, already operational in 35 countries;
o    It would also deliver regular publication of independently verified payments made to governments and the revenues received.
•    The implementation of a sovereign wealth fund,
•    The strengthening of the Department of Petroleum and Energy.