Consultation vital before legislative changes: Chamber
The Chamber of Mines and Petroleum has called for collaborative consultation when changes are to be made to existing legislation.
The chamber said this when acknowledging the passing of Oil and Gas (Amendment) Bill 2020, saying it understands the desire of the PNG Government to maximise its position in resource projects.
“However, in failing to consult, the consequences of some of these amendments will not be to the benefit of PNG but will inadvertently set back the nation’s economy for many years to come by dis-incentivising investors or making otherwise economic projects uneconomic.
“Stability of PNG’s investment framework and contract sanctity is important if the country is going to retain and attract much needed new investment. While PNG is endowed with natural resources, it lacks sufficient capital to develop them on its own, and like all successful nations, it will require foreign direct investment and private sector investment if PNG is to maximize its economic and developmental potential.
“All major projects in PNG since the 1960s have had a State Agreement either enshrined in legislation or, since the Kutubu Pipeline Oil Project in 1991, signed as an agreement and given force of law by provisions such as sections 185 of the Oil & Gas Act.
“The State agreements also importantly contained fiscal stabilisation provisions which locked in the fiscal deal and provided an agreed road map to PDL grant. This has enhanced the bankability of those projects to international project financiers, and provides a playing field that is set for all players for the duration of the project.
“Financiers want to see a committed road map before providing funding.
“Amendments to the Oil & Gas Act such as those made to section 185 will severely impact the bankability of future projects for developers, state equity participants and landowners. The section now allows a review in the effect of the project before PDL grant against a national interest test, even if these things were satisfied previously as the Project entered Front End Engineering and Design (FEED) when a State Agreement was concluded.
“It also allows the Minister discretions to grant licences and give approvals against a national interest test during the life of the project. Historically all these issues have been agreed upfront in the State Agreement.
“It is not clear to the Chamber whether it was the intention of the June amendments to the Oil and Gas Act to create this uncertainty. Consultation prior to rushing these changes may have prevented unintended consequences and the Chamber continues to offer its support to the Government as a consultative body with significant international experience among its members.
“The Chamber understands there is a desire to further modify the Oil and Gas Act and to move to a Production Sharing Contract fiscal system. Although Chamber members readily acknowledge that they successfully invest in such systems in other jurisdictions, caution is advised in ensuring any changes do indeed satisfy the needs of PNG and do optimally develop resources.”