PNG Proposes Tax Cuts to Attract Investors

A Papua New Guinea government official is hoping to gain more investors for the oil and gas sector by cutting taxes imposed by the government. Bernard Pawih, deputy secretary of PNG's Department of Petroleum & Energy, said the country is finding it difficult to compete for investors with other energy hotspots around the globe.

"The oil industry is not going to be able to sustain itself if new discoveries are not made," Pawih said at an upstream oil and gas conference in Singapore. "The future of our petroleum industry is somewhat gloomy and unpredictable," Pawih said. Pawih said PNG's tax rates are higher than those of other countries vying for exploration investment, and the government is preparing to do something about it. "We're looking at taking the taxes down from 50 percent to 30 or 35 percent. This is one of the main things that companies are looking for from the (government)," he said. Pawih said PNG expects to see four exploratory wells drilled in 2002, up from two last year, with hopes for six to 10 wells in 2003.

PNG oil production has slipped from around 140,000 barrels per day in the early 1990's to below 60,000 bpd currently. While oil reserves sit at 132 million barrels, Pawih said gas reserves total 15 trillion cubic feet, or the equivalent of three billion barrels of oil. "The future of PNG lies in gas, not oil," Pawih said.

A $3.5 billion gas pipeline project linking PNG's gas fields with Australia's eastern seaboard is the cornerstone of the country's gas dreams, Pawih said. ExxonMobil Corp took over the leadership of the 3,250 kilometer project from ChevronTexaco last year. The other participants in the PNG Gas Project are Oil Search Ltd, Orogen Minerals, Japan PNG Petroleum and Mineral Resources Development Co (MRDC), which represents landowners.

Pawih said gas flow is targeted for 2006, delayed from the earlier target of 2001 as the project seeks buyers. One of its targets is a key Townsville supply deal, which Pawih said will be announced by the Queensland state government later this month.

The government said last week that it had short-listed three bidders for the Townsville gas supply and power generation project. The bidders include The Australian Gas Light Co (AGL), which last month agreed to buy up to 50 petajoules of PNG gas a year from 2006 for 20 years.


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