Papua New Guinea
Country Profile
Petroleum Geology & Potential
Exploration/Development History
Present Status
Offered Acreage
Contract Terms
Licensing System
Current Status of licenses issued by Minister for Petroleum and Energy
2001 monthly highlights
Leased Blocks
Fiscal Terms
General Petroleum Fiscal Terms
Gas Fiscal Terms
Frontier Areas Fiscal Terms
State Participation
Bidding Procedure
Other Information
Contact Us
           The Government of Papua New Guinea has attractive incentives and packages for the international oil companies to come and explore for oil and gas (see fiscal terms). The legislation, regulations, policies, fiscal terms and other necessary information can be obtained from the oil and gas regulatory organization, the Petroleum Division of the Department of Petroleum and Energy (see Contact Us).
Location map of licenses, fields, leads and prospects of Papua New Guinea
  Licensing System
           Papua New Guinea has a concessionary petroleum regime where oil and gas are owned by the State and oil companies are issued licenses to explore, develop, process, transport and market petroleum products. The Government has in place a system of royalties, taxes, and State equity participation of up to 22.5 per cent.
           Currently, there are five types of petroleum licenses issued and administered by the Government through the Department of Petroleum and Energy. The Licenses include Petroleum Prospecting License (PPL), Petroleum Retention License (PRL), Petroleum Development License (PDL), Petroleum Processing Facility License (PPFL) and Pipeline License (PL). These licenses are respectively granted by the State through the Minister for Petroleum and Energy to applicants intending to either explore for petroleum, retain presently non-commercial gas discoveries, develop oil and gas fields, process petroleum and transport petroleum.
  Current Status of licences issued by Minister for Petroleum and Energy
           As of 31 December 2001, there are 23 Petroleum Prospecting Licenses (the trend since 1990) 5 Petroleum Development Licenses (PDLs), 3 Petroleum Pipeline Licenses (PLs), 5 Petroleum Retention License (PRLs) and one Petroleum Processing Facility Licence (PPFL). Among the PPLs, one (PPL 138) is an extended license currently in its second five-year term. Only two new PPLs (PPL 227 & 228) were granted by the Minister in 2001. The 5 PDLs cover the Kutubu, Hides, Gobe and Moran fields: Hides is basically a gas project, which provide gas for power generation for the Porgera gold mine. The Kutubu, Gobe and Moran are oil projects. In March 2000, the first Petroleum Processing Facility License (PPFL) was issued to an oil refinery developer for a refinery at Napa Napa, near the Fairfax Harbour (Port Moresby). The Refinery is currently under construction.
  2001 monthly highlights
  • 18/01/01 PPL 186 cancelled
  • 18/01/01 PPL 187 cancelled
  • 17/02/01 PDL 5 awarded
  • Hon. Roy Yaki appointed as Minister replacing Hon. Chris Haiveta
  • 26/07/01 PPL 228 awarded
  • 26/07/01 PPL 202 relinquished
  • 26/07/01 PPL 213 relinquished
  • 15/08/01 PPL 179 surrendered
  • 16/10/01 PPL 227 granted
           Twenty-one (21) of the PPLs, the 5 PDLs and the 5 PRLs are for acreage in the Papuan Basin. The North New Guinea Basin has two PPLs while the other two PPLs previously in the Cape Vogel Basin have been cancelled.
Petroleum Prospecting License since 1990
  Leased Blocks
           The map below shows various permits and the Operating oil companies as of May 2002.

Map showing Papua New Guinea's various petroleum licenses
  Fiscal Terms
           The Independent State of Papua New Guinea considers the development of the State's petroleum resources to be amongst its highest priorities. The State also recognizes the need to put in place the necessary policies, regulations and laws to help regulate the petroleum sector in the country. The Government's strong objective is to ensure that these laws and policies are internationally competitive and that they are attractive enough to lure foreign investment, where the investor can earn a reasonable rate of return on his investment. At the same time, the State is committed towards ensuring that these petroleum resources are developed in a way, which maximizes benefits to its citizens.
           The Oil & Gas Act 1998 is the major piece of legislation which is administered by the Department of Petroleum and Energy. There are also other important laws like the Income Tax Act and the Environmental Act, which are administered separately by the Internal Revenue Commission and the Department of Environment and Conservation respectively, and play a complementary role in the regulation of the petroleum sector in PNG.
           The petroleum fiscal regime in PNG is currently categorized into two areas: The General Petroleum Fiscal Terms and The Gas Fiscal Terms. Each of these is explained in the subsequent paragraphs. The third area, Frontier Terms, existed prior to 2000 but was repealed in the 2000 Taxation Review. The State intends to re-introduce it again shortly.
  1. General Petroleum Fiscal Terms
  All new tax provisions applicable 2001
  1.1 Royalties: Royalties are payable by the licensees to the State at a rate of 2% of wellhead value and are treated as a tax credit if it pays a 2% Development Levy.

1.2 Development Levies: Development levy is also paid by the licensees at a rate of 2% of wellhead value of all petroleum produced in a project, and is a normal deduction.

1.3 Income Tax: 50% of taxable income for existing petroleum projects, defined according to ordinary concepts, but subject to ring fencing. For new projects it is 45%.

1.4 Additional Profits Tax: 50% of net cash flow once a 27% rate of return has been achieved and maintained. This is only applicable to existing projects. In new projects, a two-tier system applies. First tier; 15% RoR, 20% APT. Second tier; 20% RoR, 25% APT.

1.5 Past Exploration Expenditure: Exploration expenditure in the 11 year period prior to project development is deductible. This is applicable to existing projects. For new projects, all past costs may be pooled for a 25% declining balance depreciation.

1.6 Current Exploration Expenditure: 10% of current year exploration
expenditure in any license is deductible.

1.7 Capital Expenditure: Written off against project income,
on a diminishing balance basis with an 8 year divisor. This is for existing projects. For new projects, expenditure will be distinguished between long life, 10% straight line and short life, 25% declining balance

1.8 Accelerated Depreciation: Nil

1.9 Debt: equity ratio: 3:1

1.10 Tax Losses Carried forward: twenty years
  2. Gas Fiscal Terms
           In 1995, the Government introduced new gas fiscal terms in a "White Paper on Natural Gas Policy". These new gas terms were aimed to provide adequate incentives to potential investors in the upstream and downstream sectors to facilitate commercial development of PNG's gas reserves. These new gas terms are now incorporated in the Income Tax Act and applicable provisions in the Oil & Gas Act 1998.
           As a result of these new gas terms, the Government received two separate gas development concepts: a proposal for a PNG to Queensland, Australia Gas Pipeline Project, and a LNG concept targeting the South East Asian markets. The former was promoted strongly by a Joint Venture led by Chevron Corporation but now by ExxonMobil, and is currently at a stage where it is likely to become a reality as a major resource development project.
  The new gas terms are as follows:
  2.1 Income Tax: 30% of income tax.

2.2 Old terms; Additional Profits Tax: 30%, with a 20% rate of return threshold. New terms; A two-tier system applies. First tier; 15% RoR, 20% APT. Second tier; 20% RoR, 25% APT.

2.3 Past Exploration Expenditure: 20 year carry forward.

2.4 Capital Expenditure: written off against project income over 10 years on a straight-line basis.

2.5 Accelerated Depreciation: Not Available.

2.6 Debt: equity ratio: 3:1
  3. Frontier Areas Fiscal Terms
           Frontier area fiscal terms are aimed to encourage exploration in the upstream sector, particularly in areas perceived to offer a lot uncertainties and high risks.
  The old terms are as follows:
  3.1 Income Tax: 35% of taxable income.

3.2 Additional Profits Tax: 35%, with a 20% rate of return threshold.
           These terms were repealed in the taxation review of 2000. The State intends to re-introduce them with some slight modification shortly.
  4. State Participation
           The State has the right to acquire a 22.5% interest in any petroleum development project.
           Pre 2002, Orogen Minerals Limited, a public listed company 51% owned by the State, had the option to acquire up to 20.5% interest in all petroleum projects in PNG, out of the State's 22.5% entitlement. The remaining 2% is allocated free to project area landowners impacted by the project. In the new arrangement, the Orogen option has been repealed and the State will hold and dispose the balance of the equity however it desires. A 2% free equity will still be allocated by the State to the landowners.

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Last Update: 8 August 2002