I have observed with great apprehension and trepidation in recent months the on-going public debate over the proposed bill to amend the Oil and Gas Act and Mining Act sponsored by North Fly MP Boka Kondra.
The bill would give absolute ownership rights of mineral and hydrocarbon resources to traditional landowners.
Public opinion is polarised as evident from letters to editor by various learned people.
I am a trained and experienced professional in the oil and gas industry and I feel compelled to offer my views.
Section 6 of the Oil and Gas Act recognises the State as the sole owner of all petroleum and helium deposited at or below the surface of any land (in PNG), and according to this provision, these resources are, and shall be deemed at all times, to have been the property of the State.
I have no problem with this provision and its assertion.
Vesting ownership rights with the State simply recognises and reinforces the State’s supreme and perpetual authority over the entire geographic jurisdiction it reigns over.
The State must possess and exercise complete authority over the land and our national sovereignty must be respected by both citizens and foreigners.
Petroleum is a premium commodity inextricably intertwined to established and matured global energy, petrochemical, textile, food and financial markets.
As such, to lure foreign investors would require the State to administer and regulate the petro industry, including devising compatible, cohesive and internationally competitive laws and policies.
I doubt landowners would have any compatible and coherent investment guidelines, policies and laws to give investors confidence if they were to deal directly with investors in petroleum and mining matters.
On the other hand, I fully appreciate the concerns of the advocates of the bill, who want to see ownership rights of mineral and petroleum resources vested with traditional landowners.
The State constitutes all the people of PNG and Government.
Since ownership of our natural resources is with the State, the Government, having the legal mandate to act on behalf of the State, must apply common sense and wisdom when making important decisions, especially when determining the benefits package for landowners.
I think the real issue is not about amending the respective laws.
It is about genuine recognition of traditional landowners which must be demonstrated by a fair and equitable benefits package.
What is most needed now is to devise a more transparent and equitable benefits package for our landowners.
At the same time, leaders must stop getting too involved in commercial aspects of resource projects, which is one of the reasons our people are increasingly becoming resentful.
In the petroleum sector, our landowners should be paid a minimum of 10% royalty (from current 2%) calculated at point of sales while State equity participation be reduced from the current 22.5% to 15% and the landowners given the option to purchase 5% at cost upfront.
There is economic sense to explore this proposition.
The State and oil companies must understand that oil and gas projects and associated facilities are located in remote areas where our rural people live.
Unless the people are happy, big multi-billion dollar projects can not be fully insulated from landowner-related risks.
The Government must be mindful of this because PNG’s reputation as a safe investment destination will be damaged.
So far, PNG has exported only crude oil but not natural gas or LNG.
Unlike oil, gas business is not easy. The international gas market requires supply reliability and PNG cannot afford to go wrong with this market requirement.
With PNG now fast converging to a path of being a major LNG exporter, there is a real need for a complete review for a fair and equitable benefits package for traditional landowners and nobody should brush this aside.