The Oil and Gas Act 1998 needs reform so it will be more beneficial to PNG. The question of whether this Act will be reformed was raised on the floor of Parliament by the Member for Raicoast Kessy Sawang. She said with the current Act, it is evident that PNG is not benefiting from the extraction of their natural resources especially, oil and gas.
In response, minister responsible for Petroleum and Energy Kerenga Kua agreed that the current Act is not in favour of PNG and went on to explain how the current Act works.
Minister Kua explained that the regime we have under the current Act is post war and is based on a system called a concession based licensing system.
This he said is when operators come into the country and are issued with licenses and when they make a discovery, we forfeit 100 percent of our ownership to them, meaning we give our resources to them free of charge. The developers then sell back a percentage to PNG and that is when we run to the banks to obtain loans to buy back that percentage from them.
Minister Kua described this as a buy back scam and said there is nothing we can do about that because that is the law that was made by the Parliament.
He went on to add that a draft bill was introduced to move away from the existing concession based licensing system into a new regime called the production sharing arrangement. This he said will eliminate the need to go to the banks to obtain loans as the resource will be developed at the developers cost and upon the production of the resources, the benefit will be shared between the developer and PNG.
The draft bill was pulled out due to some late submissions hence, he is determined to see the bill reintroduced and called on all politicians to show their support when the bill is brought forward.
