Papua New Guinea Minister for Petroleum Kerenga Kua has emphasised the view behind government’s push for reforms in the country’s mineral and petroleum laws revolves around freeing up vital space within the country’s already stressed debt to GDP levels for the development needs of the country.
In his opening remarks President of the PNG Chamber of Mines and Petroleum Gerea Aopi expressed the extractive sector has experienced a period of “heightened uncertainty” in 2019 and 2020.
He pointed to the concerns of industry regarding policy reforms coupled with a depressed economy along with the current Covid-19 impacts all run the risk of “ruining the hydrocarbon industry”.
Highlighting concerns in areas such as tenure risk, transition arrangements, the increased cost to do business, and constraints to business in relation to arrangements such the fly-in-fly-out employment practice in the sector.
Mr Aopi even emphasised the ever decreasing revenue in exploration that continues despite being a major earner in the past.
Mr Kua, while assuring the state being aware for all to benefit, reiterated that government has long operated the extractive sector under the current system of concessional licensing where 100 per cent of ownership of the country’s natural resources are transferred to developers, and after handing over the resource the developer grants government a 30 per cent option in mining and 22.5 per cent for the petroleum space.
He elaborated that the current regime in the sector forces government to seek funding to buy into multimillion projects for its own resources it has given away 100 per cent under current licensing, or as the minister described as “free of charge” to developers in order to partake.
Adding with the Fiscal Responsibility Act governing and limiting overall spending within prescribed limits within law, it also covers government borrowing to partake in any business venture.
Creating a dilemma where whilst the debt to GDP limits have been increased to 45 per cent, the allowance in law never gets fully realized with the historical debt stockpile still weighing on any new government taking office.
He said whatever little leeway allowed by law for borrowing most of the time gets taken up by state ventures to buy into its own resource projects.
Thus adding more to the debt stockpile and leaving no real room for real development borrowing.
Adding that government prefers to move away from the concessional based system to a benefit sharing one where state ownership is maintained from exploration, production, and to export which sees benefits being shared between both parties at the end of the process.
Ultimately the final process of distribution will be determined by both parties through contracts and not by the state, nor the developer, but in agreement.
This then frees up the state to borrow within its Debt to GDP limits for vital goods and services to the country that is not taken up by project debts.
Post Courier/PacificMiningWatch
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