The National – Wednesday, December 8, 2010
PAPUA New Guinea has, for more than 20 years, been enjoying substantial benefits from the Oil Search Ltd, whose fundamental benefits structure is progressive by world standards.
Speaking at the 11th mining and petroleum conference in Sydney on Monday, OSL managing director Peter Botten told participants that the resource business in PNG had never been healthier in terms of major project development.
He said, however, the true potential of resource wealth would not be reached without appropriate management of the huge benefit streams that would come from new developments.
Botten said since 1992, the PNG government, provincial and local level governments, landowners (cash or non-cash or indirect payments) had received a total of K11.931 billion, with the government as the main recipient of the oil industry with K8.796 billion to date.
The oil industry has a record investment in petroleum exploration and development, led by the PNG LNG, other projects and continued investment in oil.
There is potential for significant development which will only reach potential if projects operate in a stable environment, have good management and governance of benefit streams which are essential for project stability and have the need to see benefits away from resources areas.
Botten explained that primary benefit streams were mandated by the Oil and Gas Act (1996) and other legislation, while others were more discretionary and were managed through negotiation by the operator with the stakeholders.
There is, however, a need for transparency and understanding of the benefits streams in order for it to work.
This includes MoA funds distributions, which required greater governance, if they are to deliver fair outcomes.
Botten said what had worked in the benefit streams included the Mineral Resource Development Co (MRDC) payments of equity dividend and royalties in the fields.
Mandated apportionment of benefits to various stakeholders had worked, with a percentage given to community infrastructure and future generations.
Botten said it was more important than ever to manage benefits in a rigorous and transparent way.
He said recent steps by the government regarding establishment of independent sovereign wealth funds for receipts from PNG LNG was a new major positive initiative.
These first steps were encouraging and needed a full understanding by all stakeholders, he said.