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driven by the PNG LNG. Also, the petroleum sector in PNG provides employment and business opportunities to PNG citizens both directly and indirectly, from which the government collects income tax. In addition, the petroleum sector in PNG is a major foreign currency earner and one of the country’s major exports. As part of good corporate citizen obligation, operators are required to build, operate and maintain essential basic services such as roads, schools, clinics and other services in project-impacted communities. I am happy to say the future of the petroleum industry looks very promising with the government of Papua New Guinea signing the US$13 billion Papua LNG Gas Agreement in April 2019 to develop the Elk and Antelope gas fields in the Gulf Province of PNG. The government also signed the US$11 billion P’nyang LNG Gas Agreement in February 2022 to develop the P’nyang gas field in Western Province. The signing of the two gas agreements defines the fiscal framework and paves the way for the commercial development of two mega projects in the country after the successful delivery of the PNG LNG project. The development of these will certainly put PNG on the world map as a major regional LNG player, boosting PNG’s GDP, creating more job opportunities, increasing government revenue and injecting more foreign currency into the local economy in the years to come, while further elevating the country as a friendly foreign investment destination, attracting more interest in the industry. In the last four years, exploration in the petroleum sector has slowed due to the worldwide impact of the COVID-19 pandemic, with a number of players leaving the country but it has been slowly picking up with new players also entering the industry. In addition, the shortage of foreign currency in the local economy has adversely affected the industry to some extent as companies struggle to secure enough foreign currency to sustain their operations in the country. The country’s Kutubu oil fields are almost depleted with South East Gobe field planned for decommissioning. With the country’s oil fields depleting, the future of the industry remains in gas production with estimated total recoverable gas reserves (2P) of more than 25 trillion cubic feet of gas (tcf). Out of this, 10 tcf is committed to the PNG LNG project, 6.2 tcf is committed to the Papua LNG project and 4.32 tcf is committed to the P’nyang LNG project. What remains of oil will be condensate production from the gas fields. On the positive side, in line with government policy objectives and directions, the department has carried out and successfully completed a number of work programs and projects while others are still in progress. Some of the key result areas (KRAs) with their performance indicators (KPIs) are listed but not limited to the following: • After exporting the first LNG cargo in 2014, the department has initiated and signed a number of gas agreements including Papua LNG on 9 April 2019 followed by P’nyang LNG1 on 22 February 2022 with Papua LNG mobilising for FEED (front end engineering and design). Pasca A gas-condensate project, which is PNG’s first offshore, is currently in its final stages of negotiations. In addition, Stanley and Elevala Ketu gas fields are under the radar for development; • To ensure the state benefits more from its petroleum resources, the department has been working on the Petroleum National Content Policy. The approval and implementation of the policy will ensure oil and gas companies develop specific Project National Content Plans to be implemented during exploration, construction, development and decommissioning stages of a petroleum project to increase local and national participation in employment, training and skill transfer, and spinoff business opportunities; • We have undertaken and consolidated 3000 plus projects submissions for the Infrastructure Development Grants from landowners from the PNG LNG Project areas (in particular landowners from oil project areas) and sent to Department of National Planning and Monitoring for further verification and recommendations. We have also taken further steps to address the outstanding capped MOAs (Memorandums of Agreement) including other legacy issues. The issues were reconciled and listed in various NEC (National Executive Council) submissions for deliberations and further direction for possible funding allocation; • The department has successfully initiated and completed the LOBID (landowner benefit identification and determination) process for all
PNG LNG project area landowners which was outstanding since 2013. This will ensure that all landowners from PDL (petroleum development licence) to pipeline to facilities will now receive their project benefits (such as royalties) on time without any delay. It ensures project security; • We have initiated and reviewed the licensing process to consolidate, better manage and improve it; • We have initiated and reviewed the fees and charges and the licensing structure to identify new areas in which to increase non-tax revenue in line with directions from the Marape Government. This is also part of the department’s plan to generate its own revenue as a self-funding entity to operate as a statutory regulatory authority; • We have identified and executed a number of key amendments to various sections of the Oil and Gas Act, 1998 to improve, where required, the regulatory regime of the petroleum industry in line with government policy objectives and directions; • To better manage, guide, coordinate and improve the operations of the department, we have taken necessary steps required to draft and complete the Department Corporate Plan in 2019, and; • There are many other in-house projects the department has initiated targeting policy, regulatory and administrative areas to further enhance and improve its operational and administrative functions. Though the industry plays a significant role in the social and economic development and wellbeing of the country, there remain a number of key challenges especially project area landowner issues that require the effort and support of all stake holders including the national government, project areas' provincial governments, project areas' local level governments, and project area landowners. To ensure stability and security of the continuous operations of petroleum projects in the country, all stakeholders must show strong commitment to establish cordial and lasting relationship with project area landowners based on mutual trust. Not only dealing with landowner issues is of concern but the country is part of the global community. Issues such as COVID-19, foreign currency shortage, the Ukraine-Russian war and geopolitical competition between great powers only give rise to an already volatile and unpredictable global economic environment. It requires the effort and commitment of all stakeholders to ensure that the country remains competitive in the global market when it comes to investment in the petroleum sector. We appreciate the Marape-Rosso Government’s will in moving the department into a new National Petroleum Authority (NPA) and migrating the current petroleum regime into a production- sharing regime. As we move into an authority, a major restructure will happen to position the department to adequately address new and existing challenges as well as improving the overall legislative and regulatory environment of the industry. This report provides the general public and stakeholders with a better knowledge of the petroleum sector during the year 2022. And they will come to appreciate the important role the industry plays in the social and economic development and wellbeing of the country.
VOLUME 34 2023
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