Oil and Gas Law in PNG

 

Papua New Guinea (PNG) is an island country located in the southwestern Pacific Ocean. The country has significant reserves of oil and gas and the oil and gas industry is a vital part of its economy. In order to explore and exploit these resources, companies must obtain licenses from the government of PNG. In this article, we will discuss the law on oil and gas in PNG, the process of obtaining licenses, the types of licenses available, and the terms of these licenses.

The Law on Oil and Gas in PNG

The primary legislation that governs the oil and gas industry in PNG is the Oil and Gas Act 1998. This Act regulates the exploration, development, production, transportation, and sale of oil and gas in PNG. The Act provides for the grant of licenses for the exploration and production of oil and gas, and also sets out the obligations and rights of license holders. The Act is supported by regulations and guidelines that provide further details on the licensing process and other requirements.

Process of Obtaining Licenses

In order to obtain a license for the exploration and production of oil and gas in PNG, interested parties must follow a rigorous process that involves the following steps:

Application: Interested parties must submit an application to the Department of Petroleum and Energy (DPE) for the relevant license. The application must include detailed information on the proposed exploration or production activities, as well as information on the company's financial and technical capabilities.

Evaluation: The DPE evaluates the application and assesses the applicant's technical and financial capabilities. The DPE also considers the environmental, social, and cultural impacts of the proposed activities.

Negotiation: If the application is approved, the DPE will enter into negotiations with the applicant to determine the terms and conditions of the license.

Grant of License: Once negotiations are complete, the DPE will grant the license, subject to the agreed terms and conditions.

Types of Licenses

There are three main types of licenses available under the Oil and Gas Act 1998:

Petroleum Prospecting License (PPL): This license allows the holder to explore for petroleum within a defined area for a period of up to six years.

Petroleum Retention License (PRL): This license allows the holder to retain an area in which petroleum has been discovered, but which is not yet commercially viable for production. The license is valid for a period of up to five years, and can be renewed for a further five years.

Petroleum Development License (PDL): This license allows the holder to produce petroleum from a commercial discovery. The license is valid for a period of up to 25 years, and can be renewed for a further 25 years.

Terms of Licenses

The terms of licenses granted under the Oil and Gas Act 1998 vary depending on the type of license and the negotiations between the DPE and the license holder. Some of the key terms of licenses include:

Work program and expenditure commitments: License holders must commit to a work program and expenditure plan, which sets out the activities that will be undertaken during the license period and the associated costs.

Royalties: License holders must pay royalties to the government based on the value of the petroleum produced.

Taxes: License holders are also subject to various taxes, including corporate income tax, petroleum project tax, and withholding tax.

Environmental and social obligations: License holders are required to comply with environmental and social obligations, including environmental impact assessments, community engagement, and landowner compensation.

Conclusion

The law on oil and gas in PNG provides a framework for the exploration, development, production, transportation, and sale of oil and gas in the country. The licensing process is rigorous and involves evaluation, negotiation, and the grant of licenses subject to specific terms and

 

 

 

 

Location: Waigani, Port Moresby, Papua New Guinea

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