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percentage of the oil and gas resources for its own use. 14.7. Offshore Operational Policy The waters in PNG are warm and host 5% of the world’s biodiversity. Kimbe Bay in West New Britain Province, for instance, is an important biodiversity hotspot with 60% of the coral species of the entire Indo- Pacific region living there. PNG has gas discoveries offshore. The Kumul Marine Terminal is also built offshore. The PNG LNG gas pipeline runs offshore at Kopi to Port Moresby. Because the Oil and Gas Act 1998 and Oil and Gas Regulation 2000 mainly cover onshore and upstream oil and gas exploration and development, the need for a specific offshore policy, and policy guidelines and regulations to guide offshore oil and gas exploration and development cannot be ignored. 15.0 GOVERNMENT POLICY DIRECTION The state considers the development of petroleum resources as important to social and economic development of the country. The state also recognises that to develop its petroleum resources requires extensive capital investment from international oil and gas companies. Therefore, to attract major international investors, the state must offer a stable economic and political environment for investors to invest in the petroleum sector. The Marape Government, through its “Take Back PNG” policy, clearly articulates key policy areas: increase revenue; increase exports; reduce imports; create wealth; and deliver quality services. The department has, in line with government policy drivers, aligned itself and undertaken a number of initiatives which are discussed elsewhere, mainly under Section 8, 9, 10 and 14 of this report. Further, discussed below are the two main policy areas to reform the current mining and petroleum fiscal regime from the current royalty-tax concession system to an appropriate production sharing arrangement system. This message has been made clear by Prime Minister James Marape in his speech at the recent 16th Mining and Petroleum Conference in Sydney on 5 December 2022. 15.1. Production Sharing Arrangement 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 concession system to an appropriate production sharing arrangement system. This will involve reform of the Organic Law on Papua New Guinea’s Ownership of Minerals and Petroleum to provide the constitutional basis for resources ownership as well as legislative reform to set out the details of the accepted production sharing arrangement. The government will always consider a balanced approach to the development of its petroleum resources for investors to make a reasonable return on exploring for and developing oil and gas resources in Papua New Guinea. 15.2. Organic Law on Resources Development Organic Law – The government has undertaken reform on the Organic Law on Papua New Guinea’s Ownership of Minerals and Petroleum resources to provide the constitutional basis for resources ownership, transfer, commercial arrangements, and involving of Kumul Companies, as well as establishing the new National Petroleum Authority. That law is already in its final draft stages, awaiting certificate of correctness from the First Legislative Council before it is passed onto Parliament for parliamentary process of gazettal and distribution to Members of Parliament in preparation for its first reading.
economic sectors in the country – the petroleum industry. To that end, it is important that the department is well structured and positioned to effectively carry out its mandated responsibilities and functions. 16.1. Restructure of Petroleum Division The current structure of the department, especially the petroleum division, is outdated and needs immediate restructure to be on parity with the industry and other government organisational structures. The department employs some highly qualified, capable and experienced technical experts and officers in various technical fields such as geology, engineering, accounting, economics and law. But the pay structure is so outdated that most of them are employed below Grade 10 level positions. To retain highly skilled and experienced technical officers, the restructure of the department is imminent to upgrade the current positions and also create new positions in key technical areas currently lacking. Because the current structure only covers upstream, the restructure will cover midstream and downstream as well as offshore. 16.2. National Petroleum Authority (NPA) To further improve and enhance the efficiency and effectiveness of the administrative and regulatory functions of the department, it is moving into a new “National Petroleum Authority”, which will be independent and self-funded by charging a fee for service to sustain its operations. This move is already a firm commitment by the government contained in the Organic Law on Papua New Guinea’s Ownership of Minerals and Petroleum and Commercialisation of State Business 2020. In that law, the petroleum authority is a prominent feature as an independent and self-funded entity, which will charge and collect fees to sustain its operations. The proposed changes in fees and charges as discussed under Section 10.3 of this report are part of the overall efforts to position the department before moving into a new authority. 17.0 CONCLUSION In line with key government policy directions, the department will continue to work where required to improve the policy gaps and also improve the regulatory framework in a balanced and acceptable approach, taking into account the state’s aspirations of the benefits of the petroleum resources as well as the interests of the investors taking the risk to invest in capital intensive petroleum projects to make a reasonable return on their investment. The department will work closely with project area landowners, LGs, PGs and stakeholders to complete the LOBID exercise while at the same time carefully manage and address the landowners’ issues and concerns through workable mechanisms and policies. Receiving the required resources and funding support from the national government in a timely manner will not only address the challenges faced by the department but will also instill confidence in the department and government by the petroleum industry and key stakeholders. The department recognises that to address the shortcomings and challenges it faces, the need for immediate restructure of the petroleum division and establishment of the proposed National Petroleum Authority (NPA) as a self-funded entity by charging a fee for its services are necessary prerequisites of the future and effective regulation of the petroleum sector. With the full support and firm commitment of the hardworking staff, the department will continue to strive to achieve the key results areas set for the year 2023 and beyond in line with government policy directions, rolling medium term development plans, long term development plans and Vision 2050.
Enabling Legislations – The reform will also involve legislative reform, including amendments to the Oil and Gas Act 1998 and enacting the law that will establish the petroleum authority as well as setting out the details of the accepted production sharing arrangement. Work on this is in progress. 16.0 RESTRUCTURE OF DPE The Department of Petroleum and Energy administers and regulates one of the important and key
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