PETROLEUM and Energy Minister Kerenga Kua says there are several issues with the current resource laws that the country has.
This issues compelled the Government to make recent changes to those laws.
“Why the Government has set out in carrying out a series of legislative reforms in mining and petroleum is because we think that there are certain aspects of the legislative framework that we are working on are not operating to the benefit of the State and the citizens of this country,” Kua told the PNG Chamber of Mines and Petroleum virtual seminar yesterday.
“Looking at the current systems we have, for both mining and petroleum, we operate under a concession based system.”
Kua noted that some of the issues included:
- Giving away resources, without any compensation flowing back to the State;
- Buying back part of the resource (as equity) which was once fully owned by the State; and,
- Going out to the money market to borrow substantial money to finance equity which then adds to the country’s already existing debt.
“Initially, when some commercial reserves are found, development licences are given and project agreements are signed.
“At that moment, the State’s ownership of those resources are then transferred from the State 100 per cent across to the licence holder or the developer,” Kua explained.
“Moments later, the resource owner grants an option back to the State in the case of minerals, 30 per cent option.
“In the case of petroleum, 22.5 per cent.
“When that happens, the State goes into the international money market to look for money to purchase the equity.
“Up to November 2019, the statutory limit for statutory borrowing was 35 per cent.
“In passing the budget last year, the Government also set about amending that particular legislation to increase the ceiling from 35 per cent to 45 per cent,” he said.