Papua New Guinea’s petroleum players have for years relied on stable government policies to underpin their investments, but the winds of change are blowing with the current government focused on fiscal reforms.

The government led by Prime Minister James Marape has a stated vision of “taking back PNG” and making it the “richest black Christian nation”.

Marape says: “A large part of taking back PNG from the hands of the greedy few is to ensure more Papua New Guineans go into business instead of us being bystanders.

“My dream for PNG to be the richest black Christian nation is not like John F Kennedy’s dream in 1961 to put a few Americans on the moon in 10 years. Mine is the easier one if all of us dig in and do our part for our country,” he says.

“God willing, I want to live in a country 10 years from now where landowners, forest owners and sea owners of PNG are in businesses.”

Deficit

The development of the country’s natural resources endowment — oil and gas, LNG and minerals — remains essential to its economy, especially given the government is wrestling with the largest deficit in its history.

However, the government wants to improve the revenue and benefit streams that PNG receives from its natural resources projects. Total and its co-venturers in the Papua LNG project — ExxonMobil and Oil Search — were the first to feel the force of the government’s ambition.

The authorities in Port Moresby slammed on the brakes at Papua LNG by opening up re-negotiations on the project agreement that had been finalised by the previous government.

Adjustments were agreed and are being implemented so the project is ready to proceed again, except that it cannot move into front-end engineering and design until the P’nyang gas project agreement is finalised.

Negotiations for P’nyang are ongoing between the ExxonMobil-led joint venture and the government, and are said to be intense and slow.

Marape confirmed at the PNG Petroleum & Mining Conference, which has just concluded in Port Moresby, that his government is focused on natural resources fiscal reform.

Consultation with the petroleum sector will take place in early 2020.

"The government has begun a process of substantial reform but this will not be isolated from consultation with key stakeholders. We will create a forum that embraces your views and our views," says Marape. "We will consult widely to ensure the voices of the industry are heard, and to ensure all stakeholders, including landowners' voices, are heard."

"As a government, the last thing want to do is scare away our investors, so it's about finding the spaces in our resource laws where we can find more win-win outcomes," he adds.

Marape provides two examples for possible adjustments — landowner equity and local content. The current petroleum regime provides a 2% equity holding for landowners in areas where projects are developed, and he questions if that is fair.

The benefits of PNG's resources "must be shared fairly and equitably, this is now a contemporary PNG conversation", adds Marape, who comes from Hela Province in the Highlands which hosts the big gas fields that feed the PNG LNG project.

Consultation

PNG’s representative body for petroleum and mining was relieved that it will be consulted with on the review of the Oil & Gas Act and the Mining Act.

The PNG Chamber of Mines & Petroleum says it is important the two sectors should help resuscitate the country’s economy.

“The industry is well aware of the financial challenges PNG is going through and we are happy that the prime minister has indicated his government’s willingness to work with the resource sector to re-ignite PNG’s economic growth,” says the chamber.

“We are ready to engage and support the government to grow PNG’s economy whilst ensuring the country, its people, and industry investors receive a fair share from its mineral and petroleum resources.

"Critical to this partnership will be the need for the country to maintain a stable fiscal and regulatory environment that will attract genuine investors who can bring in the much-needed capital,” it adds.

However, the president of the Chamber, Gerea Aopi, sounds a warning, saying he understands the government’s desire for improved benefits sharing, but “if the investor is not making an acceptable rate of return, no investment occurs, the resource stays in the ground, adds no value to anyone and the economy stagnates. There are no winners in such a scenario”.

Politics

Petroleum reform high on the agenda in PNG