Distribution of revenues from the oil and gas industry in PNG is governed by the Oil and Gas Act. If this distribution and the resulting development implementation do not meet host community and national expectations, it can threaten the stability of Oil Search’s operating environment.
Before issuing development licences, developers undertake a social mapping exercise that can be further substantiated by the PNG Government’s Social Mapping and Landowner Identification (SMLI) process. Companies granted development permits pay royalties into a trust fund that is administered by the PNG Government.
The PNG Department of Petroleum (DoP) transfers these funds to the Mineral Resources Development Company (MRDC), which is mandated to distribute benefits to the licence area Incorporated Land Groups (ILG) identified in the SMLI and impacted provincial and local governments. Landowner benefits comprise different types of payments, including royalties, equity, development levies, infrastructure development grants and business development grants.
Negotiations between the PNG Government and landowners for the PNG LNG Project created the Umbrella Benefits Sharing Agreement, which resulted in several additional commitments from the government to landowner beneficiaries. This is reflected in the Licence Based Benefits Sharing Agreements, which define benefits distribution at a licence level.
For this reason, actively assisting the PNG Government to meet its obligations to distribute the revenue’s cash and non-cash benefits in a timely manner is a priority for us. It’s become increasingly important since the flow of revenues from the PNG LNG Project began in 2015.
We act within the existing legislative framework through approaches and structures that are designed to ensure the best outcomes for society. They leverage our expertise and resources, such as programme planning and infrastructure project delivery. Where we identify an opportunity to assist, we may approach the relevant Government agency to determine if a partnership is possible. Sometimes we help at the PNG Government’s request.
ITCS and NITCS
One of the most effective methods of infrastructure delivery for the PNG Government is through the Infrastructure Tax Credit Scheme (ITCS) and National Infrastructure Tax Credit Scheme (NITCS). We have participated in the ITCS since 2003 and the NITCS since 2013. The ITCS develops projects of significance to host communities and to the country, focusing on health, education, police and justice, and local road infrastructure e.g. the Erave to Samberigi Road, a major transport link for the country. NITCS projects are those of national importance, including the construction of PNG’s National Football Stadium, APEC Haus and the upgrading of government offices in Port Moresby.
In addition to infrastructure support, wherever it is possible within the legislative framework, we support the PNG Government to effectively distribute or deploy cash benefits from oil and gas projects for the direct benefit of communities. However, our success in these areas ultimately depends on government action. Our approaches include:
- Assistance with preparing development plans at local government level.
- Logistical support for government community identification and consultation activities, such as the Landowner Benefits Identification Programme (LOBID) for the PNG LNG Project.
- Supporting the dissemination of banking services to reduce the need for manual cash payments to landowners.
These approaches are intended to improve the translation of government revenues from oil and gas into timely tangible benefits and improvements for local economies while minimising our disruption risks.