Latest News

The Kerowagi District in Papua New Guinea's Simbu Province recently launched the Kerowagi Rugby Football League (KRL) Commissioning as part of the government's efforts to empower youth and develop communities through sports. Member of Parliament Hon. Francis Kikin Siune, in an exclusive interview with PNG Business News, emphasized the district's motto, "Leave No Kerowagi Behind." MP Siune highlighted plans for disciplined youth development, human resource initiatives, and local economic growth in areas like agriculture, tourism, and infrastructure. The launch event on April 13 was attended by numerous dignitaries and leaders, with Vice Minister for Sports Hon. Sam Basil Jnr pledging K30,000 toward the initiative and stressing the importance of sports for youth development. Also attending were MP Minister for Police, Hon. Peter Tsiamalili Jnr, and District Administrator, members of the District Development Authority (DDA), Provincial Police Commander Chief Superintendent Mazup, PNGRFL Chairman, the Provincial Administrator for Enga. Apologies were conveyed on behalf of the Minister for Higher Education, Research, Science, and Sports, Hon. Kinoka Feo, who was unable to attend due to prior commitments. Basil underscored rugby league's role in instilling discipline, teamwork, and pride among young people while fostering national identity and representing Papua New Guinea globally. “We are not just looking to field a team; we are building a foundation rooted in homegrown players like Justin Olam, who has set the benchmark in the NRL. We must connect grassroots leagues like KRL with national goals to ensure quality representation,” Basil stated. He emphasized the government's commitment to preparing for the country's debut in the National Rugby League (NRL) in 2028, aiming to produce homegrown players for world-class representation. He paid tribute to rugby pioneers such as the late Ball Numapo and celebrated the presence of rugby legend and PNG NRL Bid coach, Mr. Stanley Gene, at the event. The initiative reflects a broader strategy to use sports as a unifying and transformative force for communities, with KRL serving as a platform for talent development and youth engagement. Leaders envision the league not only as a steppingstone for local athletes but also as a catalyst for strengthening the community and positioning PNG as a formidable presence in international rugby league. “As we launch the Kerowagi Rugby Football League, let us commit to building platforms that empower our youth and unite our communities,” Basil said. “Together, we will transform dreams into reality and position PNG as a formidable force in the rugby league world.”

The country’s total mineral export revenue in 2024 was K19 billion said Mineral Resources Managing Director Jerry Garry. It is expected that this year, total export revenue will be K30 billion, subject to gold price, low exchange rates, and attainment of full production in Porgera Mine. Mr Garry made these announcements during a hand-over, take-over ceremony of the Mining Ministry between the former Mining Minister Hon Wake Goi and the new Mining Minister Hon Rainbo Paita in Port Moresby. Mr Garry said the state was currently in the process of permitting Wafi-Golpu and Frieda River Mining projects, which are worth a total value of almost USD12 Billion, adding that under the leadership of Minister Paita, the permitting of these two mega projects would be will concluded. He said as far as sustainability and continuous generation of the country’s annual revenue is concerned, mineral exploration was crucial especially for a country like PNG whose economy is largely dependent on mineral revenue. “Without exploration, there will be no mining hence no revenue for the country,” said the MD. Exploration expenditures have dwindled, and no new significant discoveries have been announced in the last decade. By current projections, all operating mines will close down by around mid 2060. The lead time or time taken from discovery to commissioning of a mine can be anywhere between 15 years as in the case of Lihir and more than 50 years as in the case of the Frieda River Mine. The use and deployment of appropriate technology is paramount, given the rugged terrains, increasing law & order issues and tougher Standard Operating Procedures (SOP) for major players amidst other challenges. “ Minister, I am proud to inform you that MRA has the capabilities to meet the challenges and associated complexities, to ensure we attract exploration investments and maintain a robust mining industry,” said Mr Garry. He said the MRA’s geological survey has commissioned a seismic reflection survey, adding that the agency was waiting for the final results before tests for deep copper-gold bodies could be conducted around the country. “We are considering the deployment of major magnetotellurics survey which has been very successful at K92 mine and also up at Tolukuma Mine. Application of technologies by the government will aid derisk many of the highly prospective belts for deeper porphyry copper-ore bodies, and encourage private sector investments in exploration and development. Mr Garry told Minister Paita that under his leadership and support, the MRA would strive to find new mineral deposits to replenish the depleting mineral inventory in this country. And the timing is critical now, more than ever.

Petroleum Minister, Hon. Jimmy Maladina has invited China State Construction Engineering Corporation to look at the petroleum industry as a choice of investment saying Papua New Guinea has a lot of potential. Minister Maladina told Mr. Wen Bing, the President of Chinese construction giant, the China State Construction Engineering Corporation (China State Construction), and his delegation when welcoming the executives to the Department of Petroleum (National Petroleum Authority) Headquarters in Port Moresby on Monday, March 31, 2025. “As for the petroleum industry in Papua New Guinea, which is oil and gas mainly, Papua New Guinea has a lot of potential.” “And as China State Construction is the biggest construction company in China and also around the world.” “We want to invite you to also look at our petroleum industry in assisting us in the contract or civil works, petroleum engineering work,” Minister Maladina said. Present also to meet Mr. Bing and his delegation were the Vice Minister for Petroleum, Hon. Alexander Orme, the Secretary for the Department of Petroleum, Mr. David Manau and Deputy Secretary, Mr. George Imanaui. Mr. Manau said also that there was a lot of potential in petroleum exploration activities in Papua New Guinea when providing details of current and upcoming projects in PNG in the petroleum sector. Mr. Bing thanked Minister Maladina and his delegation for the meeting and extended their appreciation to Prime Minister Hon. James Marape as well. China State Construction was founded in 1982 and is now worth over US12 billion dollars and a global investment and construction group featuring professional development and market-oriented operations. China State Construction carries out business management through its public company - China State Construction Engineering Corporation Ltd and has eight listed companies and more than 100 subsidiaries. China State Construction's market competitiveness and brand influence have continued to improve, and its leading position in the industry has been further consolidated.

Prime Minister Hon. James Marape has reaffirmed his government’s commitment to energy reform, economic transformation, and responsible leadership as Papua New Guinea approaches its 50th year of independence. The Prime Minister was speaking at the National Power Sector Forum, jointly hosted by the Government of Papua New Guinea and the Asian Development Bank (ADB) at APEC Haus in Port Moresby. The Forum—the first of its kind in PNG—gathered more than 100 key national and international experts, including government officials, industry leaders, and development partners, to discuss power sector priorities and solutions for achieving reliable, affordable, and sustainable energy to support inclusive and comprehensive growth. Addressing this high-level gathering, Prime Minister Marape expressed deep gratitude to the people and businesses of Papua New Guinea for their tolerance and resilience in the face of decades-long challenges in the power sector. “You have lived with the pain and misery of inefficiencies in our power sector for too long. Thank you for your great tolerance. We have inherited a broken system, but we are taking decisive action to rebuild and reform,” the Prime Minister said. Since assuming office in 2019, the Marape Government has made significant progress in stabilising PNG Power Ltd, investing over K400 million and implementing major structural reforms at both board and executive levels. A key milestone has been the establishment of the National Energy Authority (NEA), now tasked with regulatory oversight and energy policy development—freeing PNG Power to focus solely on electricity generation and distribution. “Energy drives the world. From electricity to water and transport, energy is central to human advancement. We want to ensure 100% reliable, clean energy access to our people—well before our 70th anniversary in 2045,” Prime Minister Marape declared. The Prime Minister committed to going beyond the current 70% national electrification target, pushing for universal access through decentralised power solutions, private sector partnerships, and provincial leadership. He also delivered a firm message to the public service and SOEs: “If you cannot do the job, leave the job. I have no time to waste. Our people deserve better, and the time for excuses is over.” Energy reform, he emphasised, is central to his government’s broader vision of building a K200 billion economy, capable of supporting a growing population of more than 10 million. When he took office, the economy stood at K79 billion. Today, it has reached K120 billion, with projections to exceed K130 billion by year-end. Reinforcing PNG’s reputation for fiscal responsibility, Prime Minister Marape noted that the country has never defaulted on its international debt obligations, including during the global COVID-19 crisis. “We peaked at 52% debt-to-GDP during COVID, but today we are back to 47%. We continue to honour our debts, our covenants, and our credibility as a borrower,” he said. With a landmass larger than Japan, the UK, and New Zealand—and one of the most culturally and linguistically diverse populations in the world—Prime Minister Marape said that energy solutions must be tailored to the country’s geography and decentralised realities. He reaffirmed the Government’s focus on provincial-level energy initiatives, empowering provinces like Morobe, East New Britain, and the Highlands to pursue investor-friendly, locally driven solutions. “We must stop managing PNG Power like it’s 1975. This is 2025. Let private capital in. Let innovation lead. Let’s not waste another 20 years.” As PNG looks toward 2045, the Prime Minister invited development partners and investors to join the country’s transition to clean, renewable energy, including opportunities in hydrogen, thermal, solar, and hydroelectric power. “This is a country with global potential in clean energy. Let’s build a mature, energy-secure, climate-resilient economy together,” he concluded.

In the lush plains of Cape Rodney in the Abau District, within Papua New Guinea’s Central Province, more than a thousand rubber trees stand as silent witnesses to decades of agricultural ambition and, more recently, to a growing sense of abandonment. Once a hub of rural enterprise and a key player in the nation’s cash crop economy, the region’s rubber industry now teeters on the edge of collapse, if a recent awareness report is to be believed. The report by the Cape Rodney Rubber Farmers Taskforce Committee has shed new light on the state of the Cape Rodney Agriculture Development Project (CRADP), revealing a troubling narrative of mismanagement, decaying infrastructure, and lost opportunity. Rubber has long held a special place in PNG’s agricultural quest to build the nation, yet it is “undermined and not prioritized,” according to the report. It is non-seasonal, non-perishable, and self-generating, often described as “money on the bark.” Since its introduction in the pre-colonial era, and particularly during the 1960s under the plantation schemes, rubber production has become central to Cape Rodney’s economy. CRADP currently boasts over 1.45 million rubber trees spread across 8,500 hectares, contributing 64% of the country’s total rubber output. Nationally, the industry generates approximately K70 million annually through the export of Technically Specified Rubber (TSR CR10). However, as the Field Awareness Report dated 2023 highlights, this success story is now mired in stagnation. Farmers Speak Out The Taskforce Committee, made up of farmers and landowners from the divisions of Manabo, Cocolands, Ianu, and Upulima, was formed to advocate transparency and reform. Their latest field report provides an extensive evaluation of the CRADP, focusing on how millions of kina in Public Investment Program (PIP) funds allocated for nursery rehabilitation and rural development have not yielded visible progress. At the center of the committee’s concerns is the claim that the Rubber Industry Board, tasked with overseeing industry development, has failed to deliver on key initiatives outlined in the national Medium-Term Development Plan III (MTDP III) and the Agriculture Medium-Term Development Plan (AMTDP). Mervyn Hibo, President of Cape Rodney Agriculture Development Project (CRFSA) or the farmers’ representative, reiterated their message: they need help to rebuild and revive the plantations and rubber production. For instance, Hibo noted that despite a K2-million injection through the 2023 national budget, intended specifically for nursery rehabilitation, not a single operational nursery exists in any of the divisions. A nursery established in 2014 now lies abandoned, overtaken by tall grass and weeds, he said. “This neglect poses a serious risk. With most trees now over 30 years old and increasingly susceptible to fungus and termites, without new plantings, a steep decline in rubber yield is inevitable,” he said. Equally concerning is the condition of rural infrastructure, the report noted. Access roads to plantations have deteriorated to the point of being impassable, especially during rainy seasons. Farmers face enormous challenges transporting goods or reaching essential services. In some cases, private rubber buyers have resorted to self-funding road repairs just to maintain their operations. The report also points to administrative shortcomings, including poor recordkeeping and the dilapidated state of DAL (Department of Agriculture and Livestock) offices and staff housing. Land titling remains unresolved for many farmers due to misplaced documents and outdated systems. Only a small fraction of block holders have officially secured their land titles, undermining security and long-term investment. Furthermore, rubber prices remain fixed at K1.20 a kilogram, with no price support provided since the COVID-19 pandemic. The limited number of buyers -- one at Upulima and two at Moreguina -- leaves farmers vulnerable to market fluctuations and without bargaining power. The Bigger Picture These issues are not isolated, the report noted, as they reflect “a wider pattern seen across many of PNG’s commodity boards.” Climate change, funding limitations, and a lack of localised governance have made it difficult for rural agricultural communities to thrive. Among the Taskforce’s findings and recommendations are: Return CRADP operations to Moreguina, enabling local officers to implement and monitor the Rubber Board’s work plan on-site. Forge a partnership between the Central Provincial Government, DAL, and Kumul Agriculture Holdings to revitalize the Moreguina rubber factory. Review governance structures within the Rubber Board, including a leadership transition following the expiration of the current chairperson’s term. Develop a strategic master plan, rooted in community-led committees, to align rubber industry growth with national development goals under Vision 2050 and the NADP. Despite the setbacks, hope remains, as the report emphasizes the CRADP’s potential and the determination of its people to rebuild. The rubber industry “has the capacity not only to generate revenue but also to uplift rural livelihoods and strengthen PNG’s economic independence,” Hibo said. According to the President of the Farmers and Settlers, Mr Wilson Thompson, “This is about meaningful participation. We must ensure our people benefit from the resources they have nurtured for generations.” The challenge now, as Thompson said, is for policymakers, development partners, and industry leaders to listen and to act.

The newly formed Monetary Policy Committee (MPC) of Papua New Guinea has kept the Kina Facility Rate (KFR) unchanged at 4.0%, while lowering the Cash Reserve Requirement (CRR) to 11%, in its inaugural meeting held on March 11. The decisions were announced in a media release issued by Bank of Papua New Guinea (BPNG) Governor Elizabeth Genia, who chairs the MPC. The Committee stressed the CRR adjustment should not be seen as an easing of monetary policy, but rather a technical response to prevailing conditions and an effort to address liquidity imbalances within the financial system. Governor Genia said: “The decision to maintain the KFR at 4.0% while lowering the CRR to 11% reflects an adjustment to previous policy settings in response to current conditions and the uneven distribution of liquidity within the financial system." The Committee emphasized that the inflationary pressures have eased in recent months, reducing the need for any immediate changes to the policy interest rate. MPC members remain alert to global economic developments, particularly the risks of imported inflation and the impact of Kina depreciation on domestic price levels, Genia said. While inflation is currently contained, the MPC signaled that vigilance will be maintained in monitoring any new external threats that could affect price stability in the months ahead. The Committee’s review of previous tightening measures revealed mixed results. Last year’s increase in the CRR to 12% significantly raised government borrowing costs, with Treasury Bill yields rising sharply, although private sector lending rates remained largely unaffected by the changes, indicating weak transmission of monetary policy into commercial lending markets. Regardless of the overall adequacy of liquidity in the banking system, the MPC reported that its distribution among commercial banks remains uneven. This concern played a key role in the decision to lower the CRR from 12% to 11%, a move aimed at smoothing liquidity flows and increasing market functions. Another key focus of the meeting was the importance of continuing the gradual depreciation of the Kina. The MPC reaffirmed the Bank’s commitment to allowing the currency to move towards a more market-determined, equilibrium level to improve external competitiveness and support macroeconomic stability. The Committee stated this adjustment is necessary to improve external competitiveness and support long-term macroeconomic stability. Members offered varied perspectives on policy settings as this was the inaugural session of the restructured MPC, established under amendments to the Central Banking Act in December 2024. The Committee agreed to keep its explanations concise for this initial meeting, with plans to expand the scope of future statements as members align on key policy frameworks and issues. Governor Genia confirmed that future MPC communications will provide more detailed economic analysis as the Committee’s collective experience deepens.  

Port Moresby buzzed with cultural displays and insightful discussions as Papua New Guinea inaugurated its National Tourism Conference and EXPO on April 9, marking 50 years of showcasing the nation to the world and heralding a new era of sustainable and inclusive tourism. Under the theme "Indigenizing Culture, Modernizing Infrastructure, and Promoting Peace through Tourism," the conference gathered representatives from government, the private sector, community leaders, tourism businesses, and international guests, all aiming to highlight tourism as a key pillar for economic growth. Augustine Mano, Mineral Resources Development Company (MRDC) Managing Director, emphasized the conference's role in stimulating discussions on critical issues within the sector, potentially triggering its transformation. He noted that tourism could address PNG’s economic challenges, such as foreign exchange issues, unemployment, and SME support, if properly supported. The Minister for Tourism, Arts & Culture, Hon. Belden Norman Namah, called on stakeholders to honor the past while enhancing PNG's sustainability and global appeal as a premier tourist destination. He declared: "Tourism in Papua New Guinea is not dead, tourism is alive!" Namah thanked the government for recognizing tourism's potential, and extended appreciation to key leaders within his ministry, including Mr. Eric Mossman (CEO, Tourism Promotion Authority), Mr. Stephen Kilanda (National Cultural Commission), and Mr. Alvis Waso (National Museum and Art Gallery). He credited their dedication and tireless work, despite limited funding, for keeping the tourism, arts, and culture sectors functioning. He also expressed gratitude to MRDC and other corporate sponsors. The minister stressed the untapped economic potential of tourism and encouraged optimism, despite challenges in safety and infrastructure. "Many parts of our country remain unexplored," he stated, advocating for an environment favorable to visitors. Critical enablers include tourism-specific police divisions, anti-littering laws, clean cities, and safer public spaces. Namah proposed infrastructure initiatives such as new sea terminals in coastal provinces to accommodate cruise liners, and a nationwide emergency response system for tourists. He also addressed high airfare costs, urging national airlines to lower prices and consider baggage exemptions for tourist equipment. Namah outlined plans to transition the tourism sector into a self-sustaining industry through regulation and revenue generation, including rebranding the Tourism Promotion Authority (TPA) to the “Papua New Guinea Tourism Authority” with expanded regulatory powers. He also aims to elevate the National Cultural Commission and National Museum and Art Gallery to full authorities. To maximize impact, the minister proposed creating seven tourism zones across PNG as flagship destinations. He underscored PNG's rich cultural diversity, with over 800 languages, distinct tribal customs, and natural beauty, stating: "There is no country on planet Earth like Papua New Guinea. Our best product is our culture!” He also called for better programming of cultural events to attract visitors, as Namah envisioned PNG increasing its annual tourist intake from 130,000 to over a million through strategic investments in infrastructure, safety, and marketing. "Tourism can be like discovering three gold mines (that are) sustainable, inclusive, and long-term. But we must take the first step, and that step starts now,” he said. "Many parts of our country remain unexplored. We must create an environment that is favorable and appealing to our visitors,” the minister added. Among the critical enablers he identified were tourism-specific police divisions, anti-littering and anti-loitering laws, clean towns and cities, and safer public spaces for both locals and tourists. Namah emphasized that first impressions matter, calling for better public cleanliness and urban order as core tourism “products.” Namah proposed building new sea terminals across coastal provinces, enabling cruise liners and tourist vessels to dock directly to local communities. Citing visits to places like Milne Bay Province and Rabaul-East New Britain Province, he noted the lack of such infrastructure as a major barrier to growth. Equally pressing, he said, is the need for a nationwide emergency response system to ensure swift evacuation and medical attention for tourists in the event of crises. Marape: Tourism's ‘Transformative Potential’ Prime Minister Hon. James Marape officially launched the conference, emphasizing tourism's potential to transform PNG’s economy. He highlighted tourism's role in economic growth and cultural preservation, alongside agriculture and fisheries, as a driver of sustainable development. Marape reiterated the call for collaboration to unlock the full value of the tourism industry and acknowledged Minister Namah’s strategic approach to revive the sector. He recognized the role of stakeholders, including those from the extractive resource sector like MRDC. He pointed to the success of the Connect PNG infrastructure program, which is opening remote areas and creating economic corridors for tourism. This initiative is setting the stage for PNG’s anticipated entry into the NRL from 2028. “Tourism has enormous potential in our nation. Dreams do come true, I’ve seen it happen,” Marape said, encouraging international investment and acknowledging companies like Digicel and industry pioneers such as Bob Bates. Marape reaffirmed PNG’s strategic advantage in the region, highlighting neighboring tourism markets and promoting PNG on international visits. He noted PNG’s movement toward full ASEAN membership, offering access to a 500 million-strong population. “With 134 million outbound Chinese tourists last year alone, we must tap into these markets. We're improving flight routes and airport infrastructure to support international tourism, especially from Asia,” the premier said. Marape urged collective action to drive success in the tourism sector, stating: “Let’s celebrate our country's natural beauty and cultural wealth. Instead of dwelling on negativity, we must work together to drive success and growth in our tourism sector.” The first day featured a traditional singsing and addresses from key figures, including Eric Mossman Uvovo, CEO of PNG Tourism Promotion Authority, and Mano. Sessions covered sector updates, sustainable tourism, and business development & finance access. Day two focused on investment and infrastructure, with case studies on hospitality investment and sports tourism. Sessions addressed the Connect PNG program, aviation development, destination marketing, and the future of PNG tourism branding. The conference concluded with a Gala Dinner celebrating PNG’s 50th year in global tourism, recognizing key contributors to the sector's development. The outcomes are expected to shape future strategies and policies supporting inclusive growth, investment, and global partnerships in tourism.

 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.    

Remington Technology has once again been recognised by Konica Minolta with the Sales Achievement Award for the Pacific Island region, after exceeding our annual sales target for the second year in a row. As Papua New Guinea’s only authorised Konica Minolta dealer, this back-to-back win highlights the strength of our partnership and the results our team continues to deliver. CEO Navin Raju and COO Justin Kieseker accepted the award in Sydney at the Konica Minolta Kick-Off Event, which brings together the brand’s top-performing partners from across Australia and the Pacific. “This isn’t just about hitting targets,” said Raju. “It’s about consistency, trust, and proving that a locally owned PNG business can perform on an international stage. We’ve got a solid team, a strong partnership with Konica Minolta, and we’re not slowing down.” Remington Technology continues to provide reliable document and business tech solutions across PNG, with a clear focus on service, support, and long-term value. The award is a nod to the hard work happening behind the scenes – but the real focus stays ahead. More work to do, more goals to crush.

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.”