SPECIAL TAX STATUS FOR PNG GAS PLAN LIKELY

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PORT MORESBY, Papua New Guinea (September 12, 2000 - Post-Courier/PINA Nius Online)---The Papua New Guinea government is expected to give "very favorable" tax concessions to the billion kina PNG to Queensland gas project, Petroleum and Energy Minister Fabian Pok said.

Addressing the third annual North Australia and Papua New Guinea power and gas conference, Dr. Pok said this was in recognition of the marginal economics of the project during its initial stages.

Differences over the fiscal terms for the project have been a major sticking point. This was expected to be addressed in the tax review being conducted by Sir Nagora Bogan and his committee.

Dr. Pok said discussions within the government were almost completed and the fiscal terms for the gas project would be announced.

"I believe very favorable concessions would be given to the gas project, in recognition of the marginal economics of the project during its initial stages," Dr. Pok said.

"I intend to propose an umbrella arrangement for the participation of PNG companies in the project’s wet gas infrastructure.

"The project proponents have supported this concept.

"It is a form of insurance and it will give benefits to local people and provincial governments."

Dr. Pok told the conference that the state has started detailed negotiations with companies on a gas agreement for the project and these negotiations would cover a wide range of issues including the fiscal regime and the level of state investment."

Dr. Pok said there has been good progress over the last few months, and these include the firming up of gas sales contracts, the Queensland Government’s announcement of the Cleaner Energy Strategy and the gas reserves integration in PNG.

Dr. Pok said PNG currently does not have a gas market, apart from the supply of a small quantity of gas from the Hides field, which is used to generate electricity for the Porgera gold mine.

He said the gas reserves are far from the main centers and the current potential demand for gas does not justify the costs of laying a pipeline(s).

However, he said that once the gas pipeline is in place, these options would be more attractive. "Thus, I am strongly of the opinion that the (PNG Gas) project and the development of domestic gas, using projects in PNG, are mutually supportive," Dr. Pok said.

"There is no conflict. The latter would not proceed without the former."

He said domestic projects in the next 10 years, such as using gas to generate electricity, would increase the importance of the gas industry in the PNG economy.

"Our very large gas reserves present the opportunity for the long term future of the petroleum industry, particularly as oil production inevitably declines, until new oilfields are discovered and commercialized," he said.

"The big challenge is to find a way to commercialize our large reserves, to turn them into viable and profitable commercial developments. I believe that the (PNG Gas) project is the key to that."

He said the gas project is PNG’s only serious prospect, as PNG is a relatively small oil producer at present.

The current fields produce about 80,000 barrels of oil per day, with Kutubu producing 35,000, Gobe 30,000 and Moran 15,000.

Dr. Pok also told the conference that he intends to issue the production license for Moran before the end of the year.

Dr. Pok said while the general trend in oil production is downwards, proven gas reserves now total about 12 trillion cubic feet, equivalent to seven times greater than PNG’s proven oil reserves.

He said geologists have suggested that the ultimate recoverable reserves could total as much as 40 trillion cubic feet, four times as much as current proven gas reserves.

"The big challenge for us (the government and oil companies), is how to commercialize these gas resources," Dr. Pok said.

For additional reports from The Post-Courier, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The Post-Courier (Papua New Guinea).

Pacific Islands News Association (PINA) Website: http://www.pinanius.org 

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