Papua New Guinea is a significant producer of gold, nickel, silver, cobalt, oil and gas. 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.

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. 

The latest PNG EITI work plan was published in January 2020. EITI implementation in the country aims to show the direct and indirect contribution of extractive industries to the PNG economy, 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 first PNG EITI Report, covering 2013, was launched in March 2016. The latest EITI report covering 2018 was published in December 2019. 

Governance

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. 

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