More benefits from resources: Kua
PETROLEUM and Energy Minister Kerenga Kua says he will soon bring to Parliament a bill aimed at ensuring people benefit more from their resources.
He said yesterday the new production sharing agreement was in the process of being redrafted by the department.
Kua was responding to Rai Coast MP Kessy Sawang, who pointed out that the Oil and Gas Act of 1998 was not benefiting the people.
“Most of us have always taken that the Oil and Gas Act operates repressively against people and the State,” she said.
“The Oil and Gas Act we have is post World War 2 regime, based on a system called a concession based licensing system, that’s where operators come in, we give them licenses, they make a discovery and we forfeit our right of ownership (of the resources) to them 100 per cent, importantly, we give it to them free of charge.”
Sawang said the developers had been receiving a gift and then selling back a certain percentage to PNG.
“In mining, they have an option to sell us 30 per cent. In petroleum, 2.5 per cent. They sell to us at a commercial price. It’s called a buyback scheme. That is the law that’s been passed by this government.
“When that situation arises, we go in and borrow money.
“If we want to maximise benefits out of our resources for our people, we have to reform this law,” she said.
Kua said one of the first things he had done as Minister since 2019 was to introduce a draft bill to move the country away from the concession based licensing system into a new regime called the production sharing arrangement.
“That will eliminate the need to go and borrow and we share upon the resource being produced,” he said.
Sawang also told Parliament that people needed cheaper energy to attract direct foreign investment, downstream processing, manufacturing and moving the nation towards industrialisation.
She asked Kua if cheaper, sustainable and accessible energy could be provided domestically.
2 comments
Production sharing Agreement is not a new thing. It is practise in matured oil countries. Countries that have large proven oil and gas reserves. PNG doesn’t large proven hydrocarbon reserves to dictate this types of agreement.
As a Papua New Guinean professional in the Petroleum industry with more than three decades of both national and international experiences I would like to state that what the Petroluem Minister is proposing had both negative and positive implications just as the current system.
To be transparent let discuss the investor obligation once approved by the government to explore, develop and produce hydrocarbon it discovers on the land. The Government review the investors plan on what activities that will be conducted and the amount of money it will invest in this activities. Everyone must understand that exploring for oil and gas is a highly risky business therefore the reward must be attractive to attract the investors to ce explore in PNG.
If PNG Government is concern about not having stake in the resources been discovered the it can choose up front to take a risk and participate with the investor in the exploration phase and if successful will be a join developer with the investor. If the exploration is unsuccessful then it lose all the money along with the money invested by the investor. The Government cannot expect to get free stake once discovery is made.
This apply to any other investment the government allows to invest in the country. The country benefits from the income tax, levies and other fees the investors pays to the government
Production Sharing Agreement that PM Kua is talking about is not new and used in countries that have known proven and matured Petroleum industry. PNG’s Petroleum production comes from one Petroleum basin which the Papuan Basin. The rest of the country Petroleum resources is not fully ecpored yet thus being named as frontier basins. PNG needs to maintain a investor friendly fiscal regime in order to attract potential investors to explore in frontier basins like North New Guinea, Manus,Cape Vogel. New Britian. Ramu basins.
Before the government talk about improving Landowner benefit it must work on improving the current Landowner benefit distribution scheme so everyone benefits and not just the Landowner leaders.
Comments are closed.