This report covers the extractive sector of Papua New Guinea for the fiscal year of 2019.
Papua New Guinea is a significant producer of gold, nickel, silver, cobalt, oil and gas, as is evident from the latest EITI report covering FY 2018. Until the current decade, PNG’s export commodities also included copper, but in 2018, copper volumes decreased while PNG was able to add silver, LNG, condensate, nickel and cobalt to its export commodities apart from gold and oil. The country has thus been able to diversify and expand its revenues from its endowment of natural resources in the past couple of years. In the 2019 National Budget, silver was the only export with volumes forecasted to increase over the forward estimates.
Among the country's largest gold mines are Lihir, Ok Tedi and Porgera. Oil is slowly being replaced by natural gas production. Liquefied natural gas (LNG) production started in 2014, as the PNG LNG project came on-line, and the PNG LNG project has been the primary driver of GDP growth in recent years. Social conflicts have centered on the environmental impacts of mining, state participation in extractive industries and inter-ethnic tensions. Another major issue that the EITI in PNG seeks to address is the process of paying landowners their fair shares from extractive operations.
Perception of corruption and fiscal instability also beset the country. In 2018 it was ranked 138 out of 180 countries in Transparency International’s Corruption Perception Index.
While the economy grew by 3% in 2017, it slowed significantly in 2018 with a negative growth rate of 0.6%. However, the medium-term economic outlook for PNG remains positive, with foreign investments in the pipeline. The forectas for 2019 and 2020 show 4.8% and 2.1% growth rates respectively, according to the Asian Development Bank.
The EITI is improving inter-ministerial policy coordination, serving as a platform for discussions between industry and government as well as building trust with civil society. It is also shedding light on revenue sharing mechanisms at the subnational level.
The three main taxes and fees levied on companies operating in the extractive industries include mining and petroleum tax (corporate income tax), group taxes (taxes withheld on employee salaries) and royalties. The Internal Revenue Commission (IRC) is the main body responsible for collecting and managing taxes paid to the central government. The Mineral Resources Authority (MRA) and the Department of Petroleum and Energy are the bodies responsible for collecting fees for mining and petroleum respectively. Provincial and local governments, as well as landowner groups, receive subnational payments. No contracts have been published to date because of provisions in existing laws that mandate contract confidentiality.
According to PNG's 2018 EITI report, the MRA website includes information on the different types of tenements and the application process. Tenements are not awarded through a bidding process, but through clear, detailed and consistent criteria. Oil and gas licenses are however awarded on a ‘first come first served basis’, although the technical and financial criteria for awarding licenses are not publicly defined.
Currently, Papua New Guinea does not have a publicly available register of company owners. The government also does not require extractive companies to disclose their beneficial owners (BO). However, the terms ‘beneficial owner’ and ‘politically exposed person’ are defined in the 2015 Anti-Money Laundering Act of PNG. PNG EITI has also published on its website 'beneficial ownership' and 'politically exposed person' definitions, which have been approved by the MSG and the Government of PNG entities and regulators. The MSG has moreover set a threshold of 5% ownership in its definition of BO.
PNG EITI published its Beneficial ownership roadmap on 30 December 2016. The roadmap contains a good overview of currently available information and laws on beneficial ownership in PNG, highlighting the need to include beneficial ownership disclosure in the government's national priorities. Among the identified objectives for beneficial ownership disclosure in PNG are mitigating the risks of financial misconduct and improving PNG's investment climate.
PNG aims to explore the possibility of including beneficial ownership disclosures in existing license application processes. The roadmap includes activities aimed at embedding disclosure requirements in existing legislation.
A Scoping Study on Beneficial Ownership has also been published, in March 2017. The study provided 33 recommendations in 9 salient areas to address the key gaps/barriers that would affect full compliance with the EITI standard’s requirements on beneficial ownership.
In 2019, two further reports were published that track progress with implementing the BO roadmap: PNGEITI BO Disclosure – Pilot Phase and PNGEITI BO Roadmap Implementation Manager completion report – phase 2. Among the issues outlined for the way forward are:
- Data collection procedures
- Assurance and accuracy measures of the data
- Data timeliness
- Data accessibility
- Embedding BO disclosure into law
- Raising public awareness
In December 2020, PNG EITI published its first information on beneficial and legal owners of 21/145 companies in the extractive sector. The PNGEITI BO study 2020 suggest tgat of the 21 companies that submitted their declaration, 20 companies are more than 95% owned subsidiaries of publicly listed companies. The reporting entities that have submitted a BO declaration represent more than 29% of the extractive revenues collected by PNG. None of the reported BOs was identified as a PEP by the reporting entities.
Ongoing progress on beneficial ownership disclosure are documented and uploaded continually on PNG EITI's webpage.
Papua New Guinea is a significant producer of gold, silver, nickel and liquefied natural gas (LNG). The country also produces crude oil and cobalt.
The PNG LNG project, operated by ExxonMobil PNG Ltd, started producing liquefied natural gas in 2014. The project started with an initial investment of USD 19 billion, but its capacity has exceeded expectations, reaching in excess of eight million tonnes per annum. A re-certification and upgrading of the natural gas reserves should enable the project to sustain these higher rates of production.
The 2018 EITI Report states that while surplus global LNG capacity is forecast in the short term, new capacity is expected to be required in the early 2020s.
During 2018, five principal oil fields were operating in PNG. Commercial oil production began in PNG in 1992 and has been in slow but steady decline since the mid-1990s.
|Commodity produced and exported||Produced||Exported|
|Hides Liquids (stbopd)||6,175||2,822|
|PNG LNG liquids (stbopd)||21,155||25,171|
|Hides Gas (MMscf)||2,998||2,933|
|PNG LNG Project LNG (tonnes)||7,246,136||7,143,819|
Figures sourced from the 2018 EITI Report indicate that the extractive sector contributed to 10.1% of government revenues in 2018, which is an increase from 2017 (7%) and three times higher than in 2016. Revenues were mainly collected through group tax, equity distributions, dividends and royalties. Royalties in oil and gas are paid to the Department of Petroleum and Energy, while those for mining are paid to a combination of subnational governments, landowner groups and the Mineral Resources Authority.
Clarifying the flow of revenues through central and subnational governments was one of the government’s priorities in implementing the EITI. Subnational payments include royalties, dividends, compensation payments, development levies, Special Support Grants, and other benefits as agreed through memoranda of agreement. According to the 2018 EITI Report, information relating to transfers and payments to subnational (provincial and local level) governments in PNG is difficult to obtain and reconcile.
A scoping study on sub-national payments in Papua New Guinea’s extractive sector was published in May 2019, available on PNG EITI's website.
Resource projects are subject to a royalty which is equal to 2% of the gross revenue from resource sales or wellhead value in the case of oil and gas projects.
In 2018, the largest sources of government revenue from the extractive industries included corporate income tax, salary and wage tax, dividends and royalties. Most of this revenue goes into consolidated government revenue. PNG’s budget is prepared by the Department of Treasury through a public consultative process.
The 2018 PNG EITI Report, published in December 2019 recommended measures to address challenges in the transparency of sub-national payments. Other recommendations focus on increasing data availability through PNG government web portals for licence allocation and production data, improving the comprehensiveness of revenue data and improving data quality and assurance mechanisms.
PNG has adopted a systematic way of implementing recommendations through a directive issued by the National Executive Committee requiring relevant agencies to act on these recommendations.
The EITI encourages multi-stakeholder groups to explore innovative approaches to make the EITI more relevant and useful.
- Details of oil and gas licenses were disclosed through the EITI Report for the first time, supplying gaps in the petroleum license registry.
- Information on the public listings of all extractive industry operators in PNG is provided in the first EITI Report.
- The MSG commissioned a scoping study on the possibility of implementing the EITI at the subnational level. The report was published in 2019 and found clear opportunities for rolling out PNG-EITI reporting in extractive provinces to improve the reporting of subnational extractive transfers and payments. In 2020, the project will enter a second phase, where recommendations from the scoping study will be further implemented. Steps include piloting sub-national reporting in select provinces and building the capacity of subnational entities to report to PNGEITI.
- The 2020 workplan includes innovative ways to approach reporting through the use of online-tools. A scoping study is planned that will review the possibility of introducing Online Data Reporting for future PNGEITI Reports.
- A scoping study on the operations of SOEs as part of EITI implementation requirements is also planned for 2020, according to their work plan.
Papua New Guinea became an EITI candidate country in 2014. The objective of EITI implementation in the country is to show the direct and indirect contributions of extractive industries to the PNG economy, as well as to improve public understanding in the management of extractive industries, strengthen revenue generation and collection systems of the government, and engage stakeholders to address challenges in the extractive industries.
The EITI has been effective in creating opportunities for dialogue and constructive engagement on issues of extractive industries management and has been instrumental in building trust and reduce conflict between the three constituencies. Through EITI Reports, stakeholders have now gotten a better sense of whether extractive revenues are properly recorded in the national budget and whether there is a need to ensure consistency with the nomenclature of these revenue streams to ensure they are properly referred to in other official documents vis-à-vis the national budget.The subnational outreach activities have also provided a platform for local communities to put forward their grievances on the way natural resources are managed. EITI serves as channel for these grievances to be heard at the national level.The EITI process also serves as a venue for civil society and company to discuss recommendations with the government on how to improve governance of the sector.
The latest EITI report covering 2018 was published in December 2019.
The government’s National Executive Council passed Decision 90/2013 in March 2013, expressing its unequivocal commitment to implement the EITI. An interim Multi-Stakeholder Group (MSG) was formed in 2012 and a permanent MSG was appointed in November 2013. Currently, the MSG is composed of 30 primary members, and several alternates and observers. Of the primary members, 11 are representatives from the government, four from state-owned enterprises, eight from civil society, and seven industry representatives. Hon. Sam Basil, MP Treasurer from the Ministry of Treasury, serves as Chair of the MSG. The PNG-EITI National Coordinator is Mr Lucas Alkan.
Name of Chairman of MSG:
Hon. Ian Ling-Stuckey MP Treasurer & PNGEITI Chairman
Name of National Coordinator:
- Department of Treasury
- Department of Finance
- Department of Petroleum and Energy
- Department of Mineral Policy and Geohazards Management
- Department of National Planning and Monitoring
- Department of Prime Minister and NEC
On 30 October 2018, Papua New Guinea was found to have made meaningful progress in implementing the EITI Standard. See Board decision. Papua New Guinea's Validation against the Standard commenced on 1 April 2018. The country was admitted as EITI candidate in 2014.
Papua New Guinea's next validation will commence on 1 October 2021.
Papua New Guinea's first Beneficial Ownership report was published in December 2020. It covers BO data on 21 extractive companies. Click to read the report.
This is the Papua New Guinea EITI 2021 work plan (in accordance with Requirement 1.5).
This is the Papua New Guinea EITI 2020 work plan (in accordance with Requirement 1.5).
The Annual Progress Report provides an overview of all EITI Papua New Guinea's activities during 2019
This EITI Report covers Papua New Guinea extractive sector in 2018. It was published in December 2019
The Annual Progress Report provides an overview of all EITI Papua New Guinea's activities during 2018
This is the Papua New Guinea EITI 2018 work plan (in accordance with Requirement 1.5).
Papua New Guinea's EITI beneficial ownership roadmap outlines how the country intends to disclose the beneficial owners of the companies operating in the extractives sector in line with Requirement 2.5 of the EITI Standard.
On 30 October 2018, Papua New Guinea was found to have made meaningful progress in implementing the EITI Standard. See Board decision
Timeline of Validation and related materials
1 April 2018: Validation commenced2-9 May 2018: Country visit
Initial data collection and stakeholder consultations
31 August 2018 - Report on Initial data collection and stakeholder consultation [English