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Digicel PNG recently announced a major milestone in its mission to enhance connectivity across Papua New Guinea. Since April 2022, Digicel PNG has significantly expanded its network, reaching all 21 provinces and the Autonomous Region of Bougainville, enabling more Papua New Guineans to get connected. Over the past two years, Digicel PNG has built 115 new mobile towers and upgraded 96 mobile towers to 4G LTE, achieving a 20% increase in its 4G LTE coverage, thereby solidifying its position as the largest 4G network in the country. This expansion has resulted in the network covering over 80% of the population of Papua New Guinea, including both rural areas and major urban centers such as Port Moresby, Lae, Mt Hagen, Wewak, and Kokopo. "This expansion underscores Digicel PNG’s dedication to bridging the digital divide and fostering economic and social development across Papua New Guinea," said Tarik Boudiaf, CEO of Digicel PNG. "By extending our mobile network to all 21 provinces and the Autonomous Region of Bougainville, we are making significant strides towards enabling every Papua New Guinean to get access to reliable and high-speed internet. Digicel has the largest network coverage in the country." The deployment of new towers has been strategically balanced across the Highlands region, in Momase, in NGI, and in the Southern region, bringing the new coverage to almost a million people. "We recognize the critical role that connectivity plays in today’s digital age," continued Tarik Boudiaf. "Our new builds and upgrades, especially targeting rural areas, help to ensure that remote communities are not left behind. In fact, the majority of our mobile network upgrades have been concentrated in the Momase and Southern regions, with the New Guinea Islands and Highlands regions also benefiting significantly." "By investing in our network infrastructure, we are not just improving connectivity; we are contributing to the overall development of Papua New Guinea," added Tarik Boudiaf. "Whether it’s through facilitating better communication, supporting remote education, or enabling digital commerce, our network plays a vital role in the nation’s progress." This expansion is part of Telstra’s commitment to Papua New Guinea, following its acquisition of Digicel Pacific in July 2022. This acquisition reflects Telstra’s dedication to supporting sustainable economic growth in the Pacific region.

Papua New Guinea's mining sector is set for significant advancement as Mayur Resources Limited recently secured a substantial capital injection to propel the Central Lime Project (CLP) forward. The latest AU$100 million (PGK 250 million) equity raise by Mayur signals strong investor confidence and underscores the Marape-Rosso Government’s vision for value-added resource development within PNG, the company said. Mining Minister Hon. Wake Goi commented on this project’s success, emphasizing the government's proactive role in facilitating its progress. With the commitment of the government, the developer and stakeholders, efforts are underway to finalize all requisite approvals and agreements, including the Community Development Agreement, he noted. This initiative “aligns seamlessly with the government and administration's strategy” to establish Special Economic Zones (SEZs) that foster industrialization, generate employment, and ensure long-term economic sustainability, MP Goi added. Backed by Tier 1 Australian investment bank Barrenjoey, funds from all over the globe came in to participate in the equity raise, Mayur said in a statement. This financing will fast-track the CLP, PNG’s first greenfield project that will commence construction 18 years since the last greenfield operations in Ramu Nico and Simberi. The project diversifies the mining space by downstream processes, adding value to new products to be manufactured -- quicklime, clinker, and cement. This reduces reliance on higher-cost imports and supports industries such as mining, construction, and public works, and adds long-term jobs, the government said. First production is anticipated to commence 18 months post financial close, Mayur said. The CLP, strategically located within Mayur’s Single Factory Special Economic Zone in Port Moresby’s North-Western Growth Corridor, is set to become PNG's inaugural industrial downstream manufacturing processing hub. Minister Goi said the government is actively supporting landowner participation, ensuring that local communities are integrally involved during the construction and operational phases of the project. He noted ongoing discussions with local miners to position them as primary customers for quicklime. Additionally, government entities such as PNG Water and Public Works are exploring opportunities to source supplies from the CLP, aiming to replace imports entirely. This approach retains manufacturing employment benefits within PNG and also paves the way for more affordable cement production in subsequent phases, MP Goi added. Plans are being examined to establish a PNG Cement Corporation, which would further process raw materials within the SEZ to produce building materials like bricks, pavers, pipes, and culverts. Surplus production is envisioned for export to markets such as Australia, increasing revenue streams. “As PNG approaches its 50th anniversary of independence, initiatives like the CLP signify a transformative shift towards domestic processing of raw resources. This strategy aims to strengthen local industries, reduce reliance on imports, and secure sustainable economic benefits,” Goi noted. The government's endorsement of this substantial capital raise reflects a broader policy of resource-driven industrialization, ensuring that PNG's abundant natural resources are harnessed for longer terms and benefits, he added.

The Hon. Jimmy Maladina, LLB, LLM, MP, Papua New Guinea’s Minister for Petroleum, has invited Italian energy giant Eni to explore investment opportunities in PNG’s petroleum sector, highlighting the country’s vast resource potential and upcoming licensing bid rounds for new exploration blocks. As part of the ongoing Production Sharing Contract (PSC) feasibility consultations, Minister Maladina and his delegation engaged with a wide range of stakeholders, including existing contractors operating in the region. One such company was Eni Asia Pacific, a major player in deepwater exploration and development. During discussions with Mr. Roberto Daniale, Head of Eni Asia Pacific, Minister Maladina emphasized PNG’s commitment to fostering a competitive and transparent investment environment. He noted that the government is working to unlock petroleum prospects along the Gulf of Papua and the Papua coastline, with several blocks soon to be tendered internationally through a bid process managed by the Department of Petroleum and Energy. "PNG presents significant opportunities for responsible and well-capitalized investors. Given Eni’s expertise in deepwater exploration and development, we encourage them to consider expanding into PNG," Minister Maladina stated. Mr. Daniale expressed interest on behalf of Eni, confirming that the company has been assessing potential opportunities in PNG. Eni has requested further details on the upcoming bid rounds once they are formally announced. Minister Maladina reaffirmed that PNG is entering a new era of petroleum sector management, where license conditions will be strictly enforced and speculative warehousing of exploration rights will no longer be permitted. "We are committed to ensuring that only genuine investors with the financial and technical capability to develop our resources are awarded licenses," he added. As PNG positions itself as a key player in the regional energy market, the government remains focused on attracting world-class investors to drive responsible resource development for long-term economic growth.

Prime Minister Hon. James Marape has recently (11.12.24) announced his government’s decision to partially privatise PNG Power Ltd amidst Government’s further decision to open up other parts of the country to independent power suppliers. Prime Minister Marape told the PNG CORE Investment Week in Sydney that Cabinet has approved the decision in one of its final meetings this year the partial privatization of the State-owned enterprise to improve its operations and efficiency of power supply to Papua New Guinea. The partial privatization means the State will continue to maintain its interest in PNGPL with the investor taking over management of the enterprise and equity - assets worth over K4 billion in the company. This will be the second decision Cabinet has made on PNGPL, where an earlier decision was made to look at the company’s power generation, retail and distribution status. The Prime Minister urged investors to keep an eye out for Expressions of Interest soon to be advertised, pointing out the advantage in PNG Power’s “first right to supply power” monopoly in Papua New Guinea. “Power supply is a strategic asset and investment, and PNG Power has two important assets. It has asset that is K4 billion in total, and more importantly it has monopoly in first right of supplying power with its community service obli-gation that it still holds,” said the Prime Minister. Prime Minister Marape said reforms in the energy sector have begun with the government ministry responsible ready to issue licenses to investors willing to partner his government to take power supply to parts of PNG that are out of reach of PNGPL, as up to 70 percent of the country still remains without elec-tricity supply. The Prime Minister also highlighted Government’s long-term decision to move into clean, green energy in the next 20 years, while pointing out PNG’s numer-ous clean energy potential in hydro, thermal, wind and solar sources. He urged investors to seriously consider this space and to look further down the line to selling power over the borders to Indonesia and Australia. “We want to unlock power in our country by bringing cheaper reliable and cleaner power to our people at the earliest. We have more than enough sources of clean energy where hydro remains the biggest available source. “I encourage investors to think big and take up these opportunities that are available in our country,” said PM Marape.

The Minister for International Trade and Investment, Hon. Richard Maru, announced the acquisition of majority shares in the Sepik Fresh Poultry Farm by the Australian company Taylor Pacific. The investment, worth K30 million, marks an important expansion in Papua New Guinea’s poultry industry and strengthens the country’s goal of achieving self-sufficiency in chicken production, he said. Minister Maru made the announcement on February 28, with John Taylor Director, owner of Taylor Pacific, and the Sepik Farm Manager, Mr Chris Prestwood. Taylor Pacific’s acquisition includes the buyout of shares previously held by Israeli company Innovative Agro Industries Limited. The investment will enable the completion of Stage 2 of the farm’s expansion, which includes constructing five additional broiler sheds and increasing the weekly supply of day-old chicks from 10,000 to 20,000. The farm will also significantly boost egg production to meet the growing demand in the Greater Sepik Region, the company said in a statement. Minister Maru stressed Sepik Farm’s importance in reducing PNG’s reliance on imported chicken products. "This investment will ensure we meet the high poultry demand of the Sepik people while keeping prices affordable for them," he said. Prestwood, also President of the Poultry Association of PNG, highlighted the positive outlook for PNG’s poultry industry. "We are in a very good position. Biosecurity measures have improved, and this has given confidence to investors. The expansion of Sepik Fresh will not only increase production but also ensure affordability and availability of poultry across the region," he said. Prestwood noted that boosting local production has already had a direct economic impact. "For the first time, all poultry consumed in PNG is produced locally. Previously, a carton of day-old chicks in East Sepik cost K550 due to high transportation costs. Today, with local production, that price has dropped to K270, significantly benefiting SMEs and small-scale poultry farmers," he said. Following the success of Sepik Fresh, Taylor Pacific is also planning to develop a major chicken farm in Vanapa, Central Province, to supply poultry to NCD, Central, and Gulf provinces. Minister Maru indicated that this project could expand further into cattle farming and the production of stock feed. "The Vanapa farm will help us replace expensive imported chicken and beef. The government is also keen on investing in the feed industry by producing wheat, maize, and sorghum locally. This will reduce chicken feed costs and ultimately lower the price of poultry for consumers," he stated. Taylor Pacific, which recently acquired Hugo Canning -- the manufacturer of Ox & Palm corned beef -- for K100 million, sees PNG as a long-term investment destination. Taylor, the company’s director, reaffirmed their commitment, saying: "We have invested K100 million in the last year and are looking at similar numbers for our upcoming projects. Our goal is to domesticate protein production, ensuring affordability while keeping factories open and employment strong in PNG." Minister Maru assured investors that the government is providing the necessary infrastructure and policy support to encourage private sector growth. The government has already invested in a 10-kilometer sealed road and power infrastructure to support the Sepik farm, he added. Plans are also underway to designate both the Sepik and Vanapa farms as Special Economic Zones, which would provide tax incentives and other benefits to investors. "Our biggest risk is disease, and we are committed to working closely with the Agriculture Minister to maintain strict biosecurity measures. We have also banned the import of uncooked chicken from Australia and New Zealand to protect our local industry from disease outbreaks," Minister Maru stated. "Once we meet our domestic demand, we want to export chicken and feed to other countries. This investment by Taylor Pacific is a step in that direction," he said, noting the government’s vision for PNG to become a major exporter of poultry and poultry feed.

Prime Minister James Marape has announced a bold tax reform strategy aimed at fostering investment, increasing consumer spending, and driving local industry growth. The reforms will take effect once Papua New Guinea’s economy reaches a K150 billion milestone, a target expected to be achieved within the next three to four years. He announced this at the Back to Business Breakfast in Port Moresby today. The Prime Minister emphasised that these changes will create a business-friendly environment, ensuring that economic expansion benefits both investors and citizens. Prime Minister Marape outlined key tax initiatives that will come into effect once PNG reaches the K150 billion economic threshold: Lowering corporate tax to encourage business expansion and attract further investment. Reducing personal income tax to increase disposable income and boost domestic consumption. Implementing stricter capital outflow regulations to ensure funds are reinvested locally rather than leaving the country. “These tax reductions will create the conditions necessary for businesses to thrive, ensuring that investment remains in Papua New Guinea and continues to support employment, infrastructure, and industry growth,” said Prime Minister Marape. To further strengthen PNG’s economic position, the government is focusing on Special Economic Zones (SEZs), including a tax-free business hub in Manus Province, designed to attract regional trade, investment, and industrial development. “Our vision is to position Manus as a strategic trade hub, opening up new economic opportunities and fostering partnerships with businesses seeking to expand in the Asia-Pacific region,” said the Prime Minister. Prime Minister Marape also called upon leading business organisations, including the PNG Chamber of Commerce, the PNG Business Council, the Manufacturers Council, and the Chamber of Resources and Energy, to collaborate with the government in identifying growth opportunities and shaping investor-friendly policies. He highlighted import replacement and local manufacturing as key government priorities, urging multinational and domestic firms such as Trukai Industries and those in the food sector to invest in local production to reduce PNG’s dependence on imports. “With the right incentives, streamlined regulations, and stronger industry collaboration, we can transform PNG into a regional centre for manufacturing and downstream processing,” the Prime Minister added. The government is committed to: Reducing bureaucratic barriers to make investment easier and more efficient. Encouraging foreign and domestic businesses to scale their operations in PNG. Developing an industrial and manufacturing base to create jobs and reduce reliance on imports. “This is a defining moment for Papua New Guinea’s economy,” said Prime Minister Marape. “We are restructuring our fiscal policies to ensure PNG remains an attractive destination for investment while delivering tangible benefits for businesses, workers, and the wider population.” The Marape-Rosso Government remains focused on building a robust, sustainable economy that supports private sector growth, employment creation, and long-term prosperity for Papua New Guinea.

Minister for Tourism, Arts, and Culture, Hon. Belden Namah, has launched the inaugural Papua New Guinea National Tourism Conference 2025, unveiling an ambitious vision to strengthen the country’s tourism industry through strategic investment, sustainability, and global promotion. The Conference is scheduled from April 9 to 10, 2025, at APEC Haus in Port Moresby, under the theme “Celebrating Our Unity in Diversity to Inspire Our Future.” The announcement at the Hilton Hotel on February 27 brought together key stakeholders, government officials, industry leaders, and international partners, including PNG Tourism Promotion Authority (PNGTPA) CEO Eric Mossman Uvovo and Mineral Resources Development Company (MRDC) Managing Director Augustine Mano. The Tourism Promotion Authority (TPA), in partnership with the Papua New Guinea Tourism Industry Association (PNGTIA), will host the event. It aims to convene leading experts, industry stakeholders, and key decision-makers to explore critical issues, discuss emerging trends, and develop a sustainable roadmap for the future of tourism in PNG. MRDC Commits K250,000 in Platinum Sponsorship A highlight of the launch was the announcement of MRDC's Platinum Sponsorship, reinforcing its strong commitment to tourism and hospitality. MRDC’s Mano announced the sponsorship, stating: “MRDC is contributing K250,000 towards hosting the conference as part of our long-term vision for a diversified economy beyond extractive industries.” He emphasized MRDC’s role in tourism development, particularly through investments in infrastructure and hospitality, including the introduction of the International Hilton Brand to PNG. “Tourism can complement extractive resources, as it offers a lasting benefit for our people. That’s why our investments in aviation, finance, healthcare, real estate, and power generation all contribute to building a foundation that supports and promotes tourism," Mr Mano added. Namah: Tourism a Key Economic Driver Minister Namah called the conference a vital part of the country’s long-term economic strategy. The Conference will also complement the country’s 50th Independence Jubilee Celebrations this year. “This conference will serve as a catalyst, awakening the immense opportunities within the tourism industry and encouraging Papua New Guineans to recognize the ‘pot of gold’ that exists in this sector,” he said. Sustainability was a key focus of the Minister’s address, with Namah stressing the need to balance tourism growth with environmental and cultural preservation. “Our pristine rainforests, marine biodiversity, and rich traditions must be protected. We must ensure that tourism benefits local communities while preserving our heritage for generations to come,” he said. Minister Namah highlighted ongoing efforts to promote eco-tourism, encourage responsible travel, and implement policies to prevent overexploitation of PNG’s natural and cultural assets. Recognizing the need for stronger global marketing efforts, Minister Namah announced plans to enhance digital marketing strategies, collaborate with international travel agencies, and participate in major tourism expos. “The world needs to hear Papua New Guinea’s story. From our adventure tourism to cultural festivals, we have so much to offer. It is time to make our presence known on the international stage,” he declared. Commitment to Infrastructure The Minister also outlined the government’s commitment to improving infrastructure, safety, and security to make PNG a more attractive destination for international visitors. “For Papua New Guinea to compete on the global stage, we must improve our airports, roads, and accommodation facilities while ensuring that our country is safe and welcoming to all visitors,” he stated. Namah reaffirmed the government’s commitment to working with the private sector and international partners to attract investment into the tourism industry. He urged government agencies, provincial authorities, and private sector stakeholders to collaborate in advancing PNG’s tourism agenda, commending the PNGTPA for its efforts in promoting the industry. “We must unite as a nation to unlock the full potential of our tourism industry. This is our opportunity to transform Papua New Guinea into a world-class destination,” he said. Meanwhile, Uvovo said, “The PNG Tourism Industry Association represents over 60 members, including hoteliers, transport providers, tour operators, artisans, and trekking companies. This conference is a vital platform for knowledge exchange and the development of actionable strategies to promote sustainable growth.” Uvovo added that the conference will feature a public exposition, allowing attendees to explore tourism products and experiences firsthand. Further details about the conference program, registration, and participation will be released in the coming weeks, he added.

 Michael McWalter picks up his prior discussions of petroleum sector reform (Issue No. 3 2024) and describes in more detail exactly what a Production Sharing Contract, or what a PSC, is all about. In my commentary of PNG Business News, Issue 2, 2023 entitled: Petroleum Sector Reform for Papua New Guinea, I wrote about the need to apply better governance to the sector to achieve optimal outcomes for the State. In particular, I spoke of the need for the petroleum revenues arising from petroleum resource development to be deployed wisely for the benefit of the people of PNG on capital formation activities like: education, health, social welfare, infrastructure, etc. – all of which should promote the National economy to grow, and thus improve livelihoods.  This translation of the value of resources with appropriate management into sustainable development is often called the value chain, and each aspect of the chain needs most serious and competent management.   There is little point in mobilising one’s natural resources to make an income for the State, if that money is not put to good purpose, but rather wasted one way or another by folly or malady.  Those resources may only be produced once, and not again; they are finite and have value now at such time as that kind of resource is sought after in global markets. We must remember that there may come a day when oil and gas are no longer consumed with such avid demand as today. This might eventuate as more investments are poured into the development of renewables sources of energy and advancements are made with cleaner nuclear fission and sustainable thermonuclear fusion. Oil and gas might become a quixotic, antiquated and outmoded source of energy, and thus attract considerably less value.  So, if a government is going to foster investment in petroleum exploration and development, it needs to embrace such grave and important responsibility to ensure that the Nation’s petroleum business is conducted most professionally and with total accountability. Government must ensure that the resultant revenues from subsequent production are appropriate, reasonable and respected as being derived from the overall patrimony of the people of the Nation.  This requires investment by the State in professional excellence to manage, moderate, administrate and regulate the sector and its operations firmly and fairly.  The oft cited National Petroleum Authority (NPA), which was first defined in the Government’s 1976 White Paper on Petroleum Policy and Legislation by two of our greatest leaders, Sir Michael Somare and Sir Julius Chan, has been repeatedly conceived, only to be still born. Into that vacuum, Kumul Petroleum Holdings Ltd, PNG’s de facto National Oil Company (NOC) has steadily and bravely taken the lead and embraced National development in the oil and gas sector, and all that it entails. Meantime, the Department of Petroleum and Energy has valiantly tried to keep up with ever increasing core and essential petroleum sector functions, like licensing, operational approvals, and data collection, whilst otherwise becoming absorbed, and perhaps overwhelmed, in the peripheral though, absolutely essential tasks of dealing with project area landowners, their benefit claims and their many other concerns and worries. Plans for a NPA have been formulated in great detail several times over in the last few decades, only to be forsaken, lost, sidestepped, and derailed time and time again. The whole notion of the NPA was to bring together a cadre of PNG excellence to lead the petroleum sector as the guardian of PNG’s petroleum resources. The members of that cadre were to have been well-paid for their experience and important responsibility, and as an Authority of the Government, the NPA might have been able to retain and attract some of PNG’s finest graduates in such exciting and challenging work.   I also discussed the vital need for the commerciality of petroleum developments without which investment by the industry in field development would be withheld.  I discussed how the 2020 amendments to the Oil and Gas Act imposed a test on a proposed petroleum development project that the applicant’s proposals should reflect a minimum expected return to the State over the life of any recovery of petroleum. However, that minimum expected return to the State is not specified in law and is only examined and determined by the Petroleum Advisory Board (PAB), and then considered by the Minister at the time of application for a development licence.  This leaves investors with great uncertainty and unnecessary risk throughout the period of exploration, appraisal, development planning and the application phase of petroleum resource development.  There is thus now no absolute certainty of development if a discovery of commercial extent is made. Either the PAB or the Minister may set a threshold minimum expected return to the State during the consideration of an application for development. This is at a very late stage in the cycle of petroleum resource development investment and comes just before the investing companies have to elect to develop their discovered petroleum accumulation, or not. If a field development is marginally economic, the setting of such a minimum expected return to the State might in some circumstances make corporate consideration of development uncommercial, and as a consequence the field might be left undeveloped. In any normal distribution of petroleum accumulations, there are a few large fields, a fair number of medium size fields and many smaller fields. It would not be wise to disadvantage the development of smaller and often smaller marginally economic fields, which tend to be developed after the larger fields have been found and produced, and which can readily sustain a domestic petroleum industry populated by smaller, and likely, local companies with smaller investments.  Oddly, as I said in 2023, the potential introduction of Production Sharing Contracts (PSCs) would obviate such a risky situation because the terms of development are normally locked into a PSC when originally negotiated and agreed between the State and the investing companies as contractors to the State at the outset. Being a contract, any capricious demand by the State for unexpected returns on petroleum development pursuant to a PSC would end up with the contract being the substance of legal proceedings.  I now want to pick up on my themes of a year ago and discuss optimal and necessary arrangements for petroleum development in the light of some creeping petroleum policy change in recent years, and a keen desire by the Government to change the PNG petroleum regime and to adopt the use of PSCs. I particularly wish to demystify PSCs. Figure 2: Much has been written on PSCs. Celebrated analyst, Daniel Johnston, is prominent with his simplified mapping of fiscal and commercial regimes. King & Spalding, an American multinational corporate law firm, has also written a most comprehensive book on the topic, ex libris McWalter.   WHAT ARE PRODUCTION SHARING CONTRACTS?   The notion of a Government sharing the production of oil and gas arising from the development of a successful petroleum exploration campaign by companies as part of a commercial venture was first developed and employed in Bolivia in the 1950s. A Production Sharing Contract (PSC) is an arrangement between a host Government and an international oil and gas company (IOC) for the division and allocation of the oil and gas produced between those two parties under a contract which provides for the exploration for and the development and production of petroleum resources. The allocation of a share of the production to the IOC serves to recompense the IOC for its investment and to provide a reasonable reward for its success. The Government, as owner of the resources, also provides a mechanism called a cost recovery allowance to the contractor for its work, but keeps the rest of the petroleum produced. The PSC was introduced in Indonesia in 1966, and PSCs of this kind or variants of the same are used extensively to agree the arrangements for oil and gas exploration, development, and production with oil and gas companies. PSCs of one kind or another are used in over 40 countries, throughout the world.   The PSC is not the only manner by which a government may grant oil and gas exploration, development and production rights to commercial investors and gain a share in the value of successful petroleum production.  Prior to the development of the PSC, exploration and production of oil and gas was typically governed by way of a licence or a concession agreement, and such regimes still remain in effect in many different places around the world. In many developing nations, the PSC is now the most common means by which a government allows corporate investment in the oil and gas industry. It provides a company or consortium of companies the right to explore and produce oil and gas.  In many jurisdictions, there are political or nationalistic reasons for the adoption of PSCs as they perceptibly provide the Government with greater and more direct control over its resources and the ability to exert National sovereignty over the industry more readily.   After gaining independence in 1945, Indonesian’s concessions regime came under attack by certain nationalist groups leading to the nationalisation of Royal Dutch Shell’s assets. Indonesian Law 44/60 abolished the old concessionary system and specified that: “Oil and gas mining shall only be carried out by the State and implemented by State enterprises,” and further that, “the Minister may appoint other parties as contractors of the State enterprises.” Alas, a decline in foreign investment in Indonesia’s oil and gas sector inevitably ensued. To mitigate this decline, the government eventually negotiated and agreed in 1962 with the Pan American Indonesia Oil Corporation, a subsidiary of Standard Oil of Indiana (later to become Amoco), a new contract based on legislation that was much more favourable to the Government.  The other large foreign petroleum investors, Caltex (a venture of Chevron and Texaco), Shell, and Stanvac (a venture of Socony [Standard Oil of New York] and Vacuum Oil and Standard Oil of New Jersey, later to become Exxon) followed by signing Contracts of Work in September 1963. These early PSCs were widely considered to be less controversial than the previous concessions system, as they enabled the government to maintain formal ownership of the resources until sold, while permitting the IOCs to exploit them for and on behalf of the Government. These contracts provided for the recovery of the costs of the contractor up to an agreed percentage of overall production plus an agreed, but often scaled, share of the produced oil and gas as a reward for its investment. Although often cited as the example of the use of PSCs, in 2017, in a somewhat odd twist, the Indonesian Government established a new form of PSC called the Gross Split PSC. This completely abolished cost recovery systems pioneered in the classic PSCs of the 1960s. Instead, this new arrangement simply relies on an agreed split of the actual production between the Government and the IOCs, typically 43% to the contractor for oil and 48% to the contractor for gas production, with the balance of production going to the Government. Due to a loss of faith in Pertamina (Indonesia’s national oil company) in the late 1990s (an audit had shown that Pertamina had allegedly lost about US$6.1 billion from inefficiency and corruption in 1997 and 1998) the Indonesian Government took steps to rein in control of the industry at the Ministry level, but they had no financial ability to manage the proceeds of the sale of oil and gas which were remitted to the revenue account of the National government.  Without any retained funds, this then entailed the Ministry having to seek parliamentary appropriations to pay the cost recovery allowances to the IOCs, but then the Indonesian Parliament questioned these payments. This brings home the need to think through the implications of changes in regime and the management of any given regime, especially if one is contemplating changing from a licence or concessionary regime to a contractor-based one. What is a PSC? In a PSC, a government makes a contract with an IOC to provide the necessary and requisite financial, technical, management, environmental, social, planning and logistical skills in order to explore for, and hopefully, if successful in finding oil and gas accumulations, to produce the oil and gas. The host State (that throughout most of the world, normally owns the subterranean resources) will usually be represented by the Government or a Government Petroleum Ministry, Department, Authority or quite often some other type of agency of the State, such as its National Oil Company (NOC), which will take delivery of the State’s share of production and generally manage the commercial aspects of the PSC. The IOC is typically granted an exclusive time-limited right to explore for petroleum accumulations, appraise any discovery, plan and execute development and produce oil and gas within a defined area, generally known as the contract area. Under the PSC arrangement, the IOC bears the entire risk of the project, both technical and financial. If a commercial discovery is declared, the IOC becomes entitled to a portion of any subsequent petroleum produced as an effective payment for its efforts, in addition to recouping all its costs from the production. Conversely, if no discoveries are made, the IOC receives nothing. The Government retains ownership of all the oil and gas produced, save for what oil and gas is allocated to the IOC as cost recovery petroleum, or is the subject of sharing between the IOC and the NOC as profit petroleum. This causes the Government to be involved in selling its share of the produced oil and gas.  In some jurisdictions, the IOC is allowed to keep the physical oil for itself, and the IOC makes just cash payments only to the NOC, based on the sale of the NOC’s petroleum entitlements; in others, physical oil and gas allocations are used to reward the IOC. The extent to which the NOC is involved with the exploration, development and production process varies from country to country with some NOCs seeking to take a significant lead in the business other than a just managing the PSC, whilst other NOCs take only a small participating interest in the commercial venture, so as to be within the operating consortium and to learn from it. There are commonly four key financial aspects to a PSC: royalty, cost recovery petroleum, and profit petroleum, though many other relevant matters are agreed in the PSC. Figure 3: Contents of a PSC: A sample from Equatorial Guinea, after the Republic of Equatorial Guinea, 2006    Royalty Most often and foremost, the IOC is typically expected to pay a prescribed or agreed royalty as a percentage of the gross value of oil and gas production to the State as valued at the point of export from the contract area. The royalty is often, at the State’s option, taken as a physical share of production, or alternatively by way of a payment by the IOC equivalent to the sale price of the State’s royalty share of production. Sometimes, the percentage rate of royalty may be the subject of bids for a contract area by competing oil and gas companies when bidding for the same or similar areas.  Royalty is a payment made in kind or related to produced volumes and price without regard to the profitability of the business. Therefore, in times of low petroleum commodity prices it has the effect of digging deep into profitability.  However, for a host Government, royalty is an assured payment regardless of profitability, but proportionate to the value of the produced oil and gas. Cost Recovery Petroleum Following payment of any royalty, the IOC is normally entitled to a pre-determined maximum percentage of gross production from which it may recover all its genuine costs, with any costs not recovered being carried forward to the next accounting year. Such production is known as cost oil and cost gas, and again may be taken in cash or kind. Obviously, the IOC attempts to maximise cost recovery early in the cycle of production up to the agreed maximum percentage limit, so as to recoup its expenses soonest, and likewise the Government will scrutinise the costs submitted to it for recovery as to their genuine eligibility. That scrutiny involves approval of all procurements and sub-contracts of the IOC, and represents an enormous accounting burden for the Government.   Profit Oil The oil and gas remaining after the payment of royalty to the Government and the cost recovery allowance to the IOC by the host Government is known as profit oil and profit gas, and it is generally divided between the IOC and the Government in accordance with the production sharing provisions agreed and defined in the PSC. Quite often the Government’s share of profit oil and profit gas increases as the production rates increase. Income tax Finally, the IOC is quite often required to pay income tax on its share of net benefits which should strictly amount only to profit oil, as cost oil and cost gas represent only a recoupment and recovery of costs. However, the application of income tax varies from jurisdiction to jurisdiction and in some cases the IOC’s notional income tax due is often paid by the NOC, or the State on behalf of the IOC, such that there is no financial impact on the IOC, there being just a journal entry between different parts of the Government. An income tax superposed on the PSC regime without appropriate tax deductions can rapidly make a fair PSC regime become a very hostile one.  In the calculation of the net take to the State under a PSC, one has to include the results of any Corporate Income Tax and all and any other taxes, levies or imposts that affect the outcome of the overall PSC.  In some PSCs, there is simply no tax, and the royalty, cost oil and gas, and production share are deemed to be final fiscal devices. Figure 4: It must be noted that the production or profit oil split is not the same as the overall net take to each party, after Daniel Johnston in International Petroleum Fiscal Regimes and Production Sharing Contracts      Government Involvement The objectives of the parties when negotiating a PSC and its terms will generally be diametrically opposed.  An IOC will strive to negotiate for itself as much independence and control as possible over operations, and it will want any State intervention in the running of the project to be kept to a minimum. Naturally, it will be keen to keep its costs low, by negotiating the highest cost recovery allowance and the largest production share it can, and it will seek the full recovery of all its costs. The Government will wish to have an overall say in the development of its resources in an orderly and systematic manner that creates synergies for future development. The Government will also wish to make as much money as possible, reduce cost recovery allowances, and have access to an IOC’s resources and relevant expertise, without spending much time and money. The Government may also have economic priorities for domestic petroleum supply to its economy to mitigate energy import requirements and obviate foreign exchange requirements. Throughout the contract from exploration to development to production, the Government will want to ensure that the IOC is undertaking a technically appropriate exploration work programme with appropriate levels of investment and that the exclusive right to access land or the offshore area is being used efficiently. In addition, the Government will typically be concerned to secure as many rights and benefits for the people and local businesses, including affected local communities, as possible.  This is generally accomplished by the optimisation of jobs and training for local workers through requirements to use local goods, services and contractor and subcontractor services as far is feasible and practical – this is what is typically called local content. Figure 5: The main elements of a PSC, after Hassan Harraz, Tanta University, Egypt, 20106   Why the PSC Model? The obvious advantage of the PSC model for a government is the minimal risk on its part throughout the value chain of the enterprise. It is thus able to reap the benefits of its natural resources without having to spend its own time and money even for development. This is not to say that the State does not pay. It inevitably pays for its share of all and any costs of exploration, development and production through the cost recovery process payable to the Contractor. In most cases, the Government will not have the technology needed to explore for and produce oil and gas, and so contracting the help of an IOC that has the appropriate skills, capacities and technology is usually necessary in order for the Government to exploit its natural resources optimally, especially in the offshore areas. The same is, however, also true for licence and concessionary arrangements where even if the host Government has an equity option to take up a participating interest in a petroleum development project it will still pay for at least its pro rata percentage share of sunk and past exploration, appraisal and development planning costs up to the point of the establishment of facilities for development and the commencement of the recovery of the petroleum. As and when exploration proves to be successful, the Government can secure long-term supplies and/or exports of oil and gas in a PSC regime, which it can trade as it sees fit. The long-term nature of a PSC enables the Government to predict future levels of oil and gas for domestic use, export and to make provisions in the national budget accordingly. Alternatively, the PSC model can be most lucrative for the State, if it takes the option of taking its share of production as a cash payment, rather than in kind. It is also very common for PSCs to contain provisions that as the production rate increases, the proportion of the production attributable to the Government may also increase, meaning that a significant and increasing proportion of the value of profit oil is paid to the host Government and its representative entity defined in the PSC. In all cases, at the initial stage of petroleum resource development, the IOC bears substantially all the financial risk. If, and only if, exploration proves successful and the discovered oil and/or gas accumulations are developed and produced, the IOC may be able to recover its costs through cost oil and/or cost gas and an agreed share in the profits of the remaining quantity of oil and gas. As to whether the PSC model is more favourable to the State than to IOCs in contrast to the licence or concessionary system, ultimately depends on the rates used for the various fiscal and commercial parameters in each system. In a concessionary regime, costs are only recovered slowly as depreciation allowances against assessable income. The speed of the recovery of costs depends entirely on the terms set by law and those allowed to be negotiated in the framework of a PSC. It may or may not be possible for an IOC to negotiate the terms of a PSC with more, or less financially and commercially attractive terms for petroleum development than a licence or concession arrangement might otherwise have offered under a prior regime. It is all about the terms of the selected regime, whichever is applied. Figure 6: Some terms of the petroleum regime may still be contained in legislation whilst others will be negotiable depending on the particular regime, after Daniel Johnston in International Petroleum Fiscal Regime and Production Sharing Contracts.     One possible negative aspect of the PSC model is that it is an agreed and contractual arrangement, and not the product of binding and enforceable legislation. Thus, any breach of the PSC by either party will constitute a breach of contract for which civil relief may be obtained.  Pursuant to the PSC model, the State always remains the owner of the resources, with the contract establishing the applicable compensation arrangements and level of NOC or Government involvement in the asset. The negotiation of a PSC is up front before any investment is made in exploration by the IOC, so the terms are locked in.  PSCs tend to afford IOCs less freedom to run an asset, with Contractors being subject to restrictions and required approvals in addition to those contained in the applicable legislation and regulation. Commonly Used Alternatives to the PSC There are several substantial alternatives to the PSC model. The differences in these alternatives are mainly in relation to the level of control granted to the IOC, the level of involvement of the NOC, and the compensatory arrangements for the investment made. Licences Generally, under a licence arrangement, there is normally little scope for an IOC to negotiate specific fiscal or commercial terms in relation to its exploration and production rights. Licensing regimes and their terms and conditions are typically standardised and embedded in legislation, such that the terms of each licence are near identical. This regime is most common in developed countries, e.g. UK, Norway, the Netherlands, and Australia. The terms of licences may change from time to time as the Government seeks to restrain or encourage sector investment.  The IOC is typically granted complete control over the contract area and complete ownership over any oil and gas that it successfully produces. Unlike PSCs, where ownership of the resources always remains with the State, in licence regimes ownership generally passes to the IOC at the wellhead, with the IOC’s profits from the sale of the oil and gas produced being the subject to general tax legislation, or specific petroleum taxation legislation. Like in PSCs, if the IOC fails to find commercially producible oil and gas within the limited terms and periods of their licence, they go home empty handed.  In some jurisdictions, the Government has an entitlement to join in at the development stage when the risks of finding oil or gas have been mitigated and it may either chose to pay its proportionate share of costs of exploration and development and participate alongside the IOCs, or be carried in some form or another. This can be a very profitable feature for the Government, but it essentially takes a slice of the venture away from the IOC venture at the proportionate sunk costs only, without any regard or compensation for the commercial value of any oil and gas discovered by the IOC. Concessions A concession arrangement is generally subject to a greater level of negotiation than a licence. The IOC is typically granted proprietary rights over the contract area and complete ownership over any oil and gas that it successfully produces, subject to the payment of a royalty and income tax, each of which may vary in rate depending on the level of production as negotiated and agreed. There may be specific taxes like the Additional Profits Tax (APT) which progressively applies further amounts of tax, the greater the rate of return of the production project. In some jurisdictions, licences have become more concession-like as the terms and conditions of the licences have increasingly become the subject of Agreements with the Government defining those agreed terms which are supplementary to or adjust the current and applicable legislation as sought by and agreed by both the Government and/or the IOCs. Service Contracts Under a service contract, the IOC provides its technical services to the State to explore and develop oil and gas resources, and therefore in so many ways, it is similar to a PSC. However, remuneration to the IOC is usually by way of a service fee or payments based on the value of oil produced in US$ per barrel for oil and other hydrocarbon liquids, or per million British Thermal Units (BTU) of energy for natural gas. The term of a service contract is often very short, leaving an IOC with considerable risk and no guarantee of a long production period Services contracts are common in Iran, Iraq and Kuwait and have also been used from time to time in Indonesia and the Philippines. The Overall Picture By and large, about half the world’s petroleum prospective Nations use licence/concessional systems and about half use PSC arrangements, though many of each of these are strictly hybrids involving features of one regime and the other. No particular petroleum regime is superior to any other and much depends on the degree to which the host Nation wishes to promote or reduce exploration investment according to the terms applied. Sometimes, the IOC will tolerate a slightly tougher regime, if they know that it will be stable and well-implemented in a professional and organised manner. Good subsurface prospectivity and a consequent high chance of finding accumulations of oil and gas can often be spoilt by self-imposed surface risks. Factors that may induce surface risk are Governments that: successively make petroleum regime changes, politically drive or make unqualified determination of fiscal and commercial terms without regard to the ultimate take to each party in the case of success, and the poor governance of the sector in general leading to untimely and late decision making. Indeed, a good regime whether it be a PSC-type or a licence/concessional one, will depend on the enforcement of its terms and conditions and the values agreed for those terms and conditions that determine economic outcomes.  The great difference between PSCs and other arrangements is that PSCs keep control over the produced oil and gas and its sale and disposal with the State, whereas licences and concessions leave such matters and the fate of the industry more to the will and imperatives of the corporates.  The intrinsic control of a contractor by the NOC under a PSC means the Government has to be better equipped, more efficient and more knowledgeable to operate such a regime than under a licence or concessionary regime. The State or its representative (usually its NOC) needs to make the PSC work in its favour as it is the manager of the entire enterprise and needs to lead the way. Any failure to step up to such challenges will result in a poorly planned development of the industry with delays, unrealised synergies leading to lost production, and overall loss of value from the resources. No matter what regime is applied to the development of petroleum resources, there is no doubt that resolute and appropriate petroleum policy formulation and firm and fair administration of the sector will pay dividends for any host Government willing to invest in such. The definition of a petroleum regime is not a new game; it has been done many times across the world by many Governments and there is very sound collective advice on the subject which is relatively inexpensive to access compared to the enormity of the task and the value of managing a Nation’s petroleum resources optimally. Figure 7: The IMF has some excellent specialists in its Fiscal Affairs Department who advise Governments on resource regimes and it has often commissioned books and studies on such matters as in the excellent handbook on Administering Fiscal Regimes for Resource Industries by Jack Calder, formerly of the Oil Taxation Office of the UK, ex libris McWalter.    

Ok Tedi Mining Limited’s (OTML) Senior Aquatic Ecologist, Gilton Alimaka, recently participated in an intensive 24-day training in Perth Western Australia, conducted by Sustainable Leaders in Resources (SLR) Consulting. The training was focused on laboratory processing, taxonomic identification, and statistical methods for assessing aquatic organisms (micro and macro invertebrates) and ecosystem. The training was aimed at enhancing OTML’s ecological team’s skills in analysing macroinvertebrate samples, accurately identifying species, and using statistical tools to assess environmental data. This acquired knowledge is crucial for monitoring water quality and ecosystem health, particularly in areas affected by mining. OTML Manager Environment Department, Erizo Kepe said, “Aquatic macroinvertebrates, such as mayflies and snails, are vital indicators of water quality. The ability to identify these species accurately helps in assessing environmental health, especially in ecosystems impacted by mining.” The training included hands-on exercises with real data, teaching participants statistical methods like Principal Component Analysis (PCA) and Non-metric Multidimensional Scaling (NMDS) to analyse ecological patterns and track environmental changes. Ms Kepe said, “This training strengthens OTML’s ability to monitor the environmental impact of mining, assess water quality, and predict long-term effects. The new skills also support OTML’s commitment to scientific accuracy, regulatory compliance, and environmental best practices.” By sharing this knowledge with colleagues, the training creates a culture of continuous learning thus improving the team’s overall capability to address environmental challenges. OTML’s enhanced ecological expertise contributes to better decision-making, sustainable practices, and a stronger reputation in the industry. The training is part of the Environment Department’s ongoing effort to upskill its team in their specialised scientific fields to operate more efficiently while reducing dependency on external expertise.

The Papua New Guinea Chamber of Resources and Energy (PNG CORE) is proud to announce its Highly Commended Recognition in the Best Use of Technology (500+ category) at the 2024 EventsAir Innovation Awards. This year’s awards saw a record number of high-quality submissions, making the judging process highly competitive. Despite the strong field, PNG CORE stood out for its exceptional use of the EventsAir platform, which has greatly enhanced event management and engagement across its operations. “We are grateful to receive this recognition,” said Mrs. Pansy Taueni-Sialis, Chief Operating Officer of PNG CORE. “This award highlights our commitment to leveraging technology to connect stakeholders and in streamlining our operations. The events Air platform has been integral in delivering more efficient, engaging, and impactful events that drive growth and innovation in Papua New Guinea’s mining, oil and gas sectors.” “The platform has played an enabling role in organizing and managing successful conferences, workshops, and seminars, enhancing communication, data management, and real-time engagement for more dynamic events.” “We thank the Innovation Awards organizers, our dedicated team led by Manager Events Sheryl Peter, and partners who continue to drive our digital transformation,” Taueni-Sialis added. “This recognition encourages us to keep adopting new technologies to strengthen the resources and energy sectors and contribute to the sustainable development of Papua New Guinea.” “PNG CORE remains committed to advancing the industry and promoting innovation and collaboration in the nation’s resources and energy sectors.”