This EITI Report covers Papua New Guinea extractive sector in 2016. It was published in December 2017.
The country is a significant producer of gold, copper, nickel, silver, cobalt, oil and gas. In 2013, Papua New Guinea was the world’s 12th largest producer of gold, with Lihir, Ok Tedi and Porgera the largest industrial gold mines. Small-scale mining of gold employs 60,000 to 80,000 people. Crude oil production is modest by global standards and declining due to maturing oil fields. 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. Social conflicts have centred on environmental impacts of mining, state participation in the extractive industries and inter-ethnic tensions. Another major issue that the EITI in PNG seeks to address is the lack of clarity in the process of paying landowners their shares from extractive operations.
Perception of corruption and fiscal instability also beset the country. PNG continues to suffer from fiscal woes brought about by lower revenue receipts caused by the slump in oil prices. In the last quarter of 2016, the government amended its year-end GDP growth projection to 2% as a result of low revenues from the mining sector.
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.
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 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. Contracts have not yet been disclosed.
Mining licenses are awarded on a ‘first come first served’ basis by the Mineral Resources Authority while development projects are negotiated on a case-by-case basis without disclosure of the terms. Oil and gas licenses are also awarded on a ‘first come first served basis’, although the technical and financial criteria for awarding licenses are not publicly defined. According to an on-going review by the Department of Petroleum and Energy, roughly half of all oil and gas licenses did not comply with work programme requirements of the Oil and Gas Act, according to the 2013 EITI Report.
PNG published its beneficial ownership roadmap on 30 December 2016. The roadmap contains a good overview of current 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 with the Mineral Resource Authority (MRA) or the Department of Petroleum and Energy (DPE) or in company registration processes with the Investments Promotion Authority (IPA). The roadmap includes activities aimed at disclosing the real owners of landowner companies who represent certain geographic areas within an extractive project. It also includes plans to embed disclosure requirements in existing legislations.
Papua New Guinea is a significant producer of gold, copper, nickel and gas. The country also produces crude oil, cobalt and silver.
The PNG LNG project started producing liquefied natural gas starting April 2014. The project with an initial investment of USD 19 billion is expected to produce 6.9 million tonnes of LNG per year.
|Oil||175.2||million barrels||PNG ranks 99th of 103 countries with proven crude oil reserves.|
|Gas||155.3||billion Sm3||PNG is ranked 48th in terms of proven natural gas reserves.|
The latest EITI disclosures (2013) show that PNG received US 292 million from extractive industry taxation. Revenues were mainly collected through mining and petroleum tax (43% of the total), group tax (33%) and royalties (12%). 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 governments are entitled to receive shares of at least four revenue streams, although they can also negotiate additional revenues on a case by case basis. Mining companies pay such levies directly to subnational governments, while oil and gas payments to subnational government are collected by the central government before being transferred onwards.
Subnational governments and landowner groups receive the 2% royalties for both mining and petroleum. Only two extractive industry revenue streams are recorded in the budget (corporate income tax as well as dividends) while others (royalties, license fees, production levies, dividends from NPCP, sales of commodities and project equity) are recorded in various places such as trust accounts and annual financial reports of relevant entities.
The EITI encourages multi-stakeholder groups to explore innovative approaches to make the EITI more relevant and useful.
- The 2013 EITI Report provides an overview of the significant informal mining sector in PNG, particularly artisanal and small-scale mining.
Details of oil and gas licenses were disclosed through the EITI Report for the first time, given the absence of a petroleum license registry.
- Information on the public listings of all extractive industry operators in PNG is provided in the first EITI Report.
PNG EITI published its 2016 workplan in late 2015, which includes objectives of strengthening revenue collection, improving public understanding and engaging stakeholders to address challenges in the extractive industries. The first PNG EITI Report, covering 2013, was launched in March 2016.
The government’s National Executive Council passed Decision 90/2013 in March 2013, expressing its unequivocal commitment to implement the EITI. Management of the EITI process is carried out by a multi-stakeholder group including seven representatives each from government and industry and eight from civil society. Hon. Patrick Pruaitch, the PNG Treasurer, currently leads on implementation of the EITI. Mr Manu Momo, First Assistant Secretary of the Economic Policy Division of the Department of Treasury serves as Chair of the MSG and the PNG-EITI National Coordinator is Mr Lucas Alkan.
The Annual Progress Report provides an overview of all EITI Papua New Guinea's activities during 2016.
This EITI Report covers Papua New Guinea extractive sector in 2014. It was published in March 2017.
This EITI Report covers Papua New Guinea extractive sector in 2013. It was published in February 2016.
This is the Papua New Guinea EITI 2014 Annual Progress Report (in accordance with Requirements 7.4 and 8.4).
This is the Papua New Guinea EITI 2013 work plan (in accordance with Requirement 1.5).
Olesia supports Asia team at the International Secretariat.
Olesia holds bachelor’s degree in Economic Theory from Ukraine and MSc in Strategic Marketing Management from Norway.