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.

Licenses

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.

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.