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Petroleum Licence Map of Papua New Guinea. Updated to December 2022
ExxonMobil will be required to apply for variations to PPFL2 to allow Papua and P’nyang LNG projects to share common facilities with the foundation PNG LNG project in PPFL2. 3.5. Petroleum Pipeline Licence – PL is a pipeline licence to transport hydrocarbon or its products from a takeoff point to a delivery point with a 25 year initial tenure and a further extension of 20 years. Gathering systems within a PDL or inplant pipelines in a PPFL are not considered for a PL. There are currently 13 active PLs operating in the country as of December 2022 as shown in table (left). Four new PLs were granted between 2019 and 2020. These include: PL 14 to Pacific Energy Aviation (PNG) Ltd from Tahira to Jacksons Airfield in Port Moresby (Feb 2020); PL 15 to Mobil Oil New Guinea Pty Ltd in Madang (Jul 2020); PL 16 to ExxonMobil PNG Limited from PPFL 2 to Niu Power Plant Site in Port Moresby (Nov 2019); and PL 17 to Dirio Gas and Power Co from PPFL 2 to Dirio Power Plant Site in Port Moresby (Sep 2020). In addition, two PL applications (APLs) have been received from ExxonMobil for the development of the P’nyang gas fields in PRL 3, 2 PL applications have been received from Horizon Oil (now Arran Energy) for the development of the Elevala Ketu gas fields in PRL 21, and one extension application has been received from Oil Search (now Santos) for the extension of PL 2 (Kutubu to Kumul Marine Terminal oil pipeline). These applications are under review. 4.0 PETROLEUM AND GAS AGREEMENTS The state may, as specified under the Oil and Gas Act 1998, execute various agreements with project developers, setting out the terms and conditions of the development and operations of oil and gas projects. The two main agreements required under the act are petroleum and gas agreements. 4.1. Petroleum Agreement: An agreement for petroleum development operations, setting out the terms of the operations including income tax, royalties, development levies, state’s equity and other benefits to the state. The state has signed petroleum agreements with operators for the Kutubu, Moran, North West Moran, Gobe Main and South East Gobe oil fields, setting out the fiscal terms for their development.
4.2. Gas Agreement: An agreement for gas development operations, setting out the terms of the operations including income tax, royalties, development levies, state’s equity and other benefits to the state. Gas agreements include PNG LNG Gas Agreement (May 2008), Stanley Gas Agreement (2020), Papua LNG Gas Agreement (April 2019) and P’nyang Gas Agreement (February 2022). PNG LNG project began production in 2014 but the rest are yet to be developed. 4.3. Other Agreements: The state can grant or consent any rights or discretions or authorisations for the licencee to exercise in accordance with a written agreement, setting out such terms as request and/or agreement with the state for such undertakings. 5.0 FISCAL REGIME The fiscal regime applying to the development of PNG’s oil and gas resources is set under the Oil and Gas Act, 1998 and Income Tax Act, 1959 (as amended), Division 10 – Mining, Petroleum and Designated Gas Projects. The primary fiscal regime of the country is a tax and royalty based system consisting of income tax, royalties and development levies. The state has the right to purchase, at cost, up to 22.5% participating interest in any petroleum development projects. The government’s general policy direction with respect to the petroleum and mining sectors is to reform the current mining and petroleum fiscal regime from the current royalty tax-based concession system to an appropriate production sharing arrangement system. 5.1. Royalty: Royalties are set at 2% of wellhead value of petroleum payable to the state. It is treated as tax credit against assessable income in the case where development levies are also payable. For oil projects up to now the calculation of wellhead value did not include allowance for capital costs. 5.2. Equity: The state has the right, but not the obligation, to acquire from the licencees up to a 22.5% interest in any petroleum project. The petroleum and/or gas agreements provide that this option may be exercised at the time of granting of a petroleum development licence. The interest is acquired either directly by the state through a wholly owned company called Kumul Petroleum Holdings Ltd (KPHL) or a state nominee. In the P’nyang Gas agreement (February 2022), the state secured 34.5%, more than 22.5% in the Total-led
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