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the only basin that has been fully explored and currently producing oil and gas. But the four other basins remain largely underexplored due to lack of data and funding to promote their potential for oil and gas exploration. The department has no servers and data storage and management software to store and manage its vast petroleum data in digital libraries or convert paper files into digital files to easily store and manage them. The archives branch, which stores and manages petroleum data and information, is poorly resourced and staffed to store and manage files and data about the petroleum industry. 13.5. Lack of Policies Lack of appropriate policies and policy guidelines are among the key challenges the department faces in dealing with a lot of the issues, as well as promoting, administering and regulating the petroleum sector. The lack of clear policies and guidelines also affects potential investors exploring for potential opportunities to invest in the petroleum sector of the country. The department has been working hard to address those key policy areas as further discussed below in Section 14 of this information package. 13.6. Change of Government Policy Directions The change of government policy directions and ministers have significantly affected the full implementation of government policies and key work programs as every new government and minister change the policy directions and priorities with new policies, and priorities, resulting in scrapping of work programs or their partial implementation. Implementation of certain work programs requires mobilisation of resources and funding. To complete all work programs in line with government policy directions and annual work plans of the department, stability and consistency in government policy directions and priorities are required to ensure the full implementation of priority jobs. 13.7. Compliance with Regulatory Requirements There have been instances where developers have not fully complied with regulatory requirements under the Oil and Gas Act. Instead, some developers have dealt directly with the government, ministers and bureaucrats to influence decisions of the regulator in their favour. As a result, some projects have been delayed. In some cases, the Director Oil and Gas Act has been forced to issue instruments, which is a last resort to get them to comply with regulatory compliance requirements. The department will continue to monitor and enforce stringent enforcement of the act to ensure all licencees and developers fully comply with the regulatory requirements as well as industry best practices. 13.8. Acting Outside of Regulatory Process One of the key factors where the country’s interests are not fully factored and captured in petroleum and/or gas agreements or any other agreements the state enters with developers is the failure of the government to consult or seek technical advice from the department as the regulator of the petroleum industry in PNG. In recent years, a number of signed gas agreements have failed or backfired, leading to re-negotiations. This happens because of no proper consultation with the department on the regulatory process and compliance with technical requirements. 13.9. PNG LNG Legacy Issues There still remain a number of PNG LNG project related legacy issues that haunt the department since the signing of the UBBSA14 and LBBSA15 in Kokopo in 2009. These are as follows: • LBBSA Review – The review of LBBSA is outstanding since 2015 after signing in 2009 due to lack of sufficient funding and political support. • PG & LLG Benefits Sharing – The sharing of benefits from the PNG LNG project such as development levies, royalties and equity payments among the PGs and LLGs remain outstanding. The department had planned on conducting a mini-forum in March 2013 in Kokopo to resolve these outstanding issues but failed due to the Governor for Hela taking out a Supreme Court reference on who was actually entitled to all these benefits. Until this exercise is completed, the PGs and LLGs will not receive their share (if any) of the PNG LNG project benefits.
• UBBSA and LBBSA Service Provider Claims – The department is dealing with a number of claims resulting from the Kokopo UBBSA (umbrella benefit sharing agreement) and LBBSA (licence based benefit sharing agreement) forums in 2009. Most claims under category A and B have been paid while category C claims were referred to the Department of Treasury to hold on to and pay if a claimant successfully gets the courts to authenticate their claim. • Ministerial Commitments – Ministerial commitments made by former ministers of the department and sanctioned by NEC were paid out in 2011, 2012 and 2013. The department is conducting a full reconciliation and will shortly establish if there are any outstanding commitments and will recommend how these will be addressed. The state solicitor’s office has advised that ministerial commitments are unlawful. 14.0 KEY POLICY AREAS Having the required regulatory and policy framework in place is essential to the prudent development of the country’s petroleum resources as well as effective regulation of the petroleum resources sector. The department is working on a number of policies to enhance and improve the regulatory and policy framework of the petroleum sector. 14.1. Downstream Policy The current policy framework of the petroleum sector mainly deals with the upstream exploration, drilling and production of petroleum resources. It does not cover the downstream operations of refining of crude oil and processing of natural gas as well as marketing of products derived from the processing of crude oil and natural gas. There is a need for this policy to be developed and put in place to sufficiently address areas of concern. 14.2. Gas Flaring Policy Gas flaring refers to the combustion or burning of gas during oil and gas recovery or in the production process of oil and gas or in petrochemical processing. Uncontrolled flaring of gas can result in waste of gas resources or can be very harmful to the environment, which is a major concern for greenhouse gas emission and global warming.Therefore, ensuring controlled flaring of gas through appropriate policies and guidelines is essential to ensure there is no waste or polluting of the environment. 14.3. Decommissioning and Abandonment Policy Decommissioning is the process of ending oil and gas production operations and returning the environment including the ocean and sea floor to its original condition after the oil and gas production facilities reach the end of their production life. It is a complex process that involves time, resources, expertise and a lot of money. There is no policy to provide policy guidelines for decommissioning of the oil and gas facilities built in PNG, most of which have already reached the end of their life. 14.4. National Content Policy The World Bank defines national content as “the extent to which the output of the extractive sector generates further benefits to the economy beyond the direct contribution of its value-added, through its link to other sectors”. The idea of national content is enshrined into our constitution, laws and other regulations, however, the implementation of it has been lacking. Thus, the importance for national content policies for each revenue sector cannot be ignored. 14.5. Landowner Benefit Sharing Policy Lack of clear policies and policy guidelines have proved to be a difficult challenge for the department with many of the project area landowner issues resulting from the sharing of oil and gas project benefits such as royalty, equity and other benefits. It is very important that such policies are in place to provide clear guidelines and mechanisms on how oil and gas project benefits can be shared among different landowner groups, LLGs and PGs. 14.6. Domestic Market Obligation Policy In recent times during the negotiations of the gas agreements for the PNG LNG, Stanley and Papua LNG projects, the state has negotiated hard to retain a certain percentage of the gas for its own use (such as gas to electricity) or for other purposes (such as providing feed gas to support the establishment of a local petrochemical industry). A policy on DMO under Section 67 of the Oil and Gas Act, 1998 lacks the provision of clear policy guidelines for the state to retain a certain
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