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Port Moresby, Papua New Guinea

Papua New Guinea

Status
Meaningful progress
Joined
19 March 2014
Latest validation
2018
Latest data from
2017
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Overview and role of the EITI

Papua New Guinea is a significant producer of gold, nickel, silver, cobalt and natural gas. The extractive sector plays a vital role in Papua New Guinea’s economy, accounting for 28% of the country’s GDP and 88% of total exports in 2019. The PNG Liquefied Natural Gas (LNG) project, which began production in 2014, has been primary driver of economic growth and an important source of employment for Papua New Guinean citizens. 

However, the sector has also been at the centre of social conflicts around the environmental impacts of mining, revenue sharing, state participation in extractive industries and inter-ethnic tensions. In this context, the PNGEITI has sought to address issues related to revenue sharing mechanisms at the subnational level. EITI implementation is also helping to improving coordination among various ministries and serving as a platform for dialogue between industry, government and civil society.

Economic contribution of the extractive industries

8%
to government revenues
28%
to GDP
88%
to exports
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Download open data on government and company revenues, revenues by revenue stream and indicator, summary data and more.


Innovations and policy reforms

  • In 2021, PNGEITI published a study on extractive state-owned enterprises, with recommendations to improve the management and reporting of these companies and their expenditures.
  • In April 2019, the PNG government adopted the National Policy for Transparency and Accountability in the Extractive Sector in Papua New Guinea to institutionalise the EITI. The policy requires that contracts and environmental reports be made publicly accessible, and that EITI data be used as a diagnostic to monitor data produced by government agencies.
  • In 2019, PNGEITI published a study on subnational payments and transfers of extractive revenue. The report identified gaps and opportunities for improving subnational reporting and laid the foundation for piloting recommendations in select provinces.
  • Details of oil and gas licenses were disclosed through EITI reporting for the first time, supplying gaps in the petroleum license registry.

The EITI process continues to be a platform for dialogue related to the extractive industries. It has also continued to be a valuable mechanism by which gaps in existing government systems are identified, and recommendations of stakeholders are elevated by policymakers to improve the governance of the sector in the country.

Lucas Alkan Head of PNGEITI National Secretariat

Extractive sector data

Production and exports

Gold

Revenue collection

Level of detail 2

Revenue distribution

2017
Standardised revenue types

Top paying companies

2017

Extractive sector management

License and contracts

Mining licenses (tenements) are awarded by the Tenement Administration Branch of the Mineral Resources Authority (MRA), while special mining leases for large-scale operations are issued by the Head of State. License are made publicly available via the MRA’s online cadastre. Oil and gas licenses are awarded on a first come first served basis by the Department of Petroleum and Energy (DPE), although the technical and financial criteria for awarding licenses are not publicly defined.

No contracts have been published to date because of provisions in existing laws that mandate contract confidentiality. 

Beneficial ownership

Papua New Guinea does not have a legal framework mandating the disclosure of beneficial ownership information. However, the terms “beneficial owner” and “politically exposed person” are defined in the 2015 Anti-Money Laundering Act of PNG. The PNG Multi-Stakeholder Group (MSG) defines a beneficial owner as an individual who owns or controls 5% or more of the shares or voting rights in a legal entity.

In 2020, PNG EITI published a study with information on beneficial and legal owners for the first time, covering 21 out of 145 companies operating in the extractive sector. Of these, 20 companies are more than 95% owned subsidiaries of publicly listed companies. The reporting entities that declared their beneficial owners contribute more than 29% of extractive revenues collected by the government.

Revenue distribution

Provincial and local-level governments and landowners receive shares of extractive revenues through subnational payments and transfers, which include shares royalties, dividends, compensation payments, development levies, Special Support Grants and other benefits as agreed through memoranda of agreement.

However, as evidenced in a 2019 PNG EITI study, distribution mechanisms are complex and there is a lack of clear, reliable, timely and useful reporting on subnational payments. As such, clarifying the flow of revenues through central and subnational governments remains a priority for EITI implementation in Papua New Guinea.


EITI implementation

Governance

PNG EITI is administered by the Papua New Guinea Multi-Stakeholder Group (MSG), which is hosted by the Ministry of Treasury. The MSG is currently chaired by Hon. Ian Ling-Stuckey, Minister of Treasury. It is comprised of representatives from government, industry and civil society.

Timeline

Validation

Papua New Guinea was found to have made meaningful progress in implementing the 2016 EITI Standard in October 2018, following its first Validation. The Validation identified 14 corrective actions to be addressed by the country’s next Validation, expected to commence in April 2022.

Scorecard

Latest Validation: 30 October 2018
Year

Assessment of EITI requirements

  • Not met
  • Partly met
  • Mostly met
  • Fully met
  • Exceeded
Scorecard by requirement View more Assessment View more

Overall Progress

MSG oversight

1.1Government engagement

Government provides support and resources to the EITI process, actively participates in MSG meetings, and acts on the MSG’s recommendations. There is enough evidence to show that government representatives are able to follow-up on decisions made by the MSG and that they are sufficiently engaged in the design of the EITI process.

1.2Industry engagement

The largest companies actively participate in MSG activities, and contribute to discussions of broader issues in the sector. While the same number of companies fail to submit signed reporting templates and tax waivers through the years, this does not seem to affect the quality of company engagement in general.

1.3Civil society engagement

There is an enabling environment for civil society participation and no known restrictions on the right to express, operate, associate and engage wider constituencies. There is no evidence to suggest that the government has attempted to restrict public debate in relation to EITI implementation. Civil society is able to fully participate in the EITI process.

1.4MSG governance

All constituencies regularly attend MSG meetings and actively participate in the design and implementation of the EITI, and engage in substantive conversations about the issues in the sector.

1.5Work plan

The 2017 and 2018 work plans contain objectives aligned with national issues, have measurable and time-bound activities, provide for plans to address capacity constraints, legal obstacles, and scope of EITI reporting, as well as plans for implementing recommendations. They are fully costed with indication of the sources of funding.

Licenses and contracts

2.1Legal framework

The 2016 EITI Report contains sufficient information on the governing laws in the sector and the roles of the regulatory agencies. It provides an overview of the applicable fiscal regime and the level of fiscal devolution. Policy reforms are also mentioned.

2.2License allocations

While the EITI Report provides a list of mining tenement awards and transfers, the list appears to be non-comprehensive. For oil and gas, specific licenses awarded in 2016 were not provided in the report. The report only describes the general process for awarding and transferring licenses, and does not include the technical and financial criteria used.

2.3License register

While the report covers all significant aspects of the requirement for mining tenements, there are significant shortcomings in the public availability and comprehensiveness of information on oil and gas licenses. Information on dates of application, award or expiry, coordinates, and commodity(ies) covered by oil and gas licenses were not provided.

2.4Policy on contract disclosure

The 2016 EITI Report sufficiently explains the government’s policy and actual practice when it comes to contract disclosure. It should be noted, however, that contracts in PNG are not publicly accessible due to confidentiality provisions in the contracts.

2.5Beneficial ownership

Not assessed

The 2016 EITI Report does not contain any information on beneficial owners, although it provides some information on legal owners of mining companies. No such information was given for oil and gas companies.

2.6State participation

The report provides a list of companies in which the government holds majority equity interest. However, the list of state participation does not appear to be comprehensive. The report clarifies the actual practice of financial relations between SOEs and the government, but does not describe the statutory rules governing the financial relations.

Monitoring production

3.1Exploration data

The 2016 EITI Report provides an overview of the mining, oil and gas sectors, including significant exploration activities.

3.2Production data

While PNG has made efforts to reconcile production volumes, the 2016 EITI Report does not provide the production values for minerals and oil and gas. The significant discrepancies in the reconciliation of production figures and the incomplete reporting by the government are also a concern, given that data are based on companies’ self-reporting.

3.3Export data

The 2016 EITI Report discloses export values for all minerals, oil and gas exported in 2016, but only provides export volumes for minerals, oil and condensate, not for LNG. While LNG export volumes for 2016 were published on the PNG EITI website in May 2018, there is no reference to the availability of this data in the 2016 EITI Report.

Revenue collection

4.1Comprehensiveness

The report does not provide an assessment of the materiality of non-reporting companies’ payments to government. The high value of unreconciled discrepancies is a concern, particularly given stakeholders’ lack of confidence in the explanations provided for discrepancies. There is also no evidence of full unilateral disclosure of government revenues.

4.2In-kind revenues

Not applicable

Although the report does not explicitly state that the government is not entitled to in-kind revenues as fiscal payments, there was consensus among stakeholders consulted that this requirement was not applicable to PNG under the current fiscal regime.

4.3Barter agreements

Not applicable

While the 2016 EITI Report categorises expenditures under infrastructure tax credit (ITC) mechanism as a form of barter arrangement, stakeholders confirmed that extractives companies were not required to undertake expenditures under the ITC scheme.

4.4Transportation revenues

Not applicable

The 2016 EITI Report confirms that according to Treasury, transport revenues do not exist in PNG except for pipeline fees, which are not material.

4.5SOE transactions

The 2016 EITI Report discloses, but does not reconcile, some revenues collected by SOEs from mining, oil and gas companies they hold interests in. While dividends paid by two SOEs to Treasury are disclosed and reconciled, it is unclear whether reporting of SOE transactions with other government entities is comprehensive.

4.6Direct subnational payments

The 2016 EITI Report provides vague and contradictory explanations of the structure and materiality of subnational direct payments linked to the extractives. There is also confusion between subnational direct payments, subnational transfers, SOE transactions with provincial governments and private-to-private transactions (with landowner groups).

4.7Disaggregation

The data is disaggregated to the levels required by the Standard, i.e., by individual company, revenue stream and government entity for all revenue streams.

4.8Data timeliness

PNG is ahead of the required reporting cycle, having published 2016 data on 30 December 2017. The 2015 data was also published on 30 December 2017.

4.9Data quality

The report does not provide a clear statement on the comprehensiveness and reliability of financial data, coverage of reconciliation, nor the materiality of payments from reporting entities that did not provide required quality assurances.

Revenue allocation

5.1Distribution of revenues

The report explains how extractive industry revenues are recorded in the budget. However, there are concerns regarding the accuracy of the information. Where revenues are not recorded, the allocation of revenues were not explained. The report also does not provide links to financial reports.

5.2Subnational transfers

The report does not clearly distinguish between subnational direct payments, subnational transfers, SOE dividends, earmarked revenues from the Consolidated Revenue Fund, social expenditures and private-to-private transactions not strictly covered by the EITI Standard. Also, the value of subnational transfers of extractives revenues is not disclosed.

5.3Revenue management and expenditures

Not assessed

It is encouraging that the MSG has made an attempt to include information on the budget-making process, as well as some information on revenue management in the 2016 EITI Report.

Socio-economic contribution

6.1Mandatory social expenditures

The report does not distinguish between mandatory cash and in-kind social expenditures. Comprehensive information as to the nature, value and beneficiaries of social expenditure projects is also missing from the report. Nevertheless, the MSG made efforts to disclose information on mandatory social expenditures despite confidentiality constraints.

6.2Quasi-fiscal expenditures

While the report notes that no SOE reported any quasi-fiscal expenditures (QFEs) for 2016, some stakeholders view that that material QFEs exist and should be disclosed. It is unclear whether the MSG’s approach to assessing the existence and materiality of QFEs was comprehensive of all types of expenditures that could be considered quasi-fiscal.

6.3Economic contribution

The report provides, in absolute and relative terms, estimates of the extractive industries’ contribution to GDP, government revenues, exports, employment and location of major extractive activities. While 2016 employment data provided is not comprehensive, the report is transparent about the constraints in sourcing reliable employment data for PNG.

Outcomes and impact

7.1Public debate

There is public dissemination of information and it can be seen from online articles and publications that EITI data is referred to in understanding the issues in the sector. There are efforts to engage the media and seek various platforms to promote EITI and contribute to public debate.

7.2Data accessibility

Not assessed

While EITI summary data templates are regularly published, there are no efforts to analyse and simplify data. It is not clear how revenues in the report correspond to the reference system adopted by government.

7.3Follow up on recommendations

The quality of the recommendations from PNG EITI Reports are remarkable. There is progress in some significant recommendations while the rest of the recommendations have been discussed with agencies. The MSG has adopted a formal mechanism to follow-up on these recommendations.

7.4Outcomes and impact of implementation

The MSG’s efforts to review outcomes and impact of EITI implementation are limited and feedback is not sought from other stakeholders outside of the MSG. Nonetheless, there is substantial information on progress against recommendations and against work plan objectives, as well as a good narrative of activities in the annual progress report.


Key documents


Contacts