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in the natural resource sector, especially in the non-renewable sector. This will involve reform of resource laws to unleash opportunities for resource owners and other stakeholders. It requires the department to review the revenue policy platforms to maximise a fairer and equitable return through taxation and equity from the resource projects. 2.0 DEPARTMENT OF PETROLEUM AND ENERGY (DPE) 2.1. Regulator The Department of Petroleum and Energy (DPE) regulates
1.0 OVERVIEW 1.1 Policy Objective for Petroleum Resources The independent state of Papua New Guinea considers the development of the state’s petroleum resources to be amongst its highest priorities. The state is committed to the development of these resources in a way which maximises the benefits of petroleum production to the people of PNG, while minimising social, environmental and economic costs. At the same time the state recognises the need to develop its resources in conjunction with international oil and gas companies and that to attract major overseas investors, it must offer a stable economic and political environment that allows the investor the opportunity to make a reasonable return on exploring for and developing oil and gas resources in PNG. 1.2 Ownership of Petroleum Resources Pursuant to Section 6 of the Oil and Gas Act 1998, ownership of petroleum resources, onshore and offshore, belong to the state, which licenses others to explore for, recover and sell or otherwise dispose of petroleum so recovered. 1.3 Social and Economic Development The petroleum sector in PNG plays a very significant role in the development and sustaining of the country’s social and economic welfare directly and indirectly. • GDP - PNG’s economy is driven by the extractive sector, mainly mining and petroleum. In 2018, the extractive sector contributed 29% to the GDP of the country, mainly driven by the PNG LNG project. After eight years of production (from 2014-2022), the PNG LNG project has contributed K16.5 billion to the state coffers. This includes: K7.5 billion to Kumul from the state’s 19.4% equity, K1.3 billion to MRDC as equity for project area landowners, K0.8 billion as royalty payment, K0.7 billion development levy payment and K6.2 billion in tax payments. • Employment – The extractive sector in PNG provides employment opportunities to PNG citizens both directly and indirectly, from which the government collects personal income tax. • Major foreign currency earner (export) – In 2018, the extractive sector contributed 89% of PNG’s total exports, mainly driven by the PNG LNG project. • Government revenue – In 2018, the extractive sector contributed 9.4% of PNG’s total revenue from corporate taxes, royalties, dividends, development levies, salary and wage taxes and foreign contractor withholding taxes etc. • Community & infrastructure projects – As part of good corporate citizen obligation, operators build, operate and maintain essential basic services such as roads, schools, clinics and other services in project-impacted landowner communities. They also must build infrastructure projects under the PNG Government’s Credit Scheme. 1.4 Policies and Legislation Framework Main Legislations – The Oil and Gas Act 1998 (as amended) is the principal legislation that governs petroleum exploration and development, and state entitlement and benefits in Papua New Guinea. It spells out the role and purpose of the legislation in key areas including exploration, development, processing and transportation, and makes provisions for grant of benefits to traditional landowners, local level governments and provincial governments arising from the production, processing and transportation of petroleum in PNG. Other Legislations – Other important legislations include but are not limited to: IncomeTax Act 1959 (as amended), Division 10 – Mining, Petroleum and Designated Gas Projects; VAT legislation and stamp duty legislation; Environmental Act 2000; Environmental Contaminants Act (Chapter 368); Water Resources Act (Chapter 205); Mineral Resources Pty Ltd. (Privatisation) Act 1996; Resource Contracts Fiscal Stabilisation Act 2000; and Organic Law on Provincial Governments and Local Level Governments. Petroleum and Gas Agreements - In addition, companies are required to enter into an agreement with the state, called a petroleum agreement. Most companies enter into this before drilling the first exploration well in the licence area. The agreement must be entered into before the grant of a petroleum development licence. In the case of a gas project, the relevant agreement is a gas agreement. 1.5 Current Government’s Policy Drive The current Marape-Rosso government is set to address challenges
the development of petroleum and other sources of energy for the long-term benefits of the state in a way which is ethical, socially responsible and environmentally sound. The Oil and Gas Act 1998 and the Oil and Gas Regulations 2002 govern exploration for, and production of, petroleum in the state, onshore and offshore. The DPE is responsible for administering and
applying the act and regulations to deliver the required outcomes for the state and people of Papua New Guinea. 2.2. Organisational Structure
The DPE consists of two key functions: Petroleum Division deals with the licensing, regulation and development of petroleum resources. The Energy Wing deals with all aspects of energy and policy development, especially in the renewable energy subsector. The Corporate Services Division supports the administration of the two key functions. The Energy Wing is now a separate authority under the National Energy Authority (NEA). Because the development of petroleum involves social, economic, technical, legal, policy and landowner aspects, the Petroleum Division is further branched into registry, exploration, engineering, coordination, economics, policy and legal branches. 2.3. Former Energy Wing to National Energy Authority The DPE's former Energy Wing reformed to become the newly established National Energy Authority (NEA). This is part of a wider effort to reform the energy sector to realign with government development goals and objectives. On 21 April 2021, National Parliament passed the National Energy Authority Act 2021 and the Electricity Industry (Amendment) Act 2021. On 10 June 2021 the Speaker of Parliament certified these into operation and they were gazetted on 6 July 2021. Though the National Energy Authority is designed to operate as an authority under its own act, it is still in its transition stages. The job security and welfare of the staff of the former Energy Wing are catered for in the transitional provisions of the act. It will take three to four years for the transition to be fully implemented. 3.0 LICENSING REGIME The PNG petroleum licensing regime is essentially a sequence of processes between an application for a petroleum licence and the termination of that licence if awarded. The five licence types are as follows. 3.1. Petroleum Prospecting Licence – PPL is an exploration licence with a 6 year initial tenure and 5 years extension. A total of 48 PPLs and 25 operators are active in the country as of December 2022. Due to COVID-19 and other reasons, the number of PPLs started dropping in 2018, from 104 to 72 in 2019, and to 63 in 2020
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