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Government wants its share of windfall profits

PORT MORESBY, Papua New Guinea (PNG Post-Courier, June 2, 2008) – The Government has ensured that the country benefited from the liquefied natural gas project (LNG) as the world experienced rising oil prices.

Treasury and Finance Minister Patrick Pruaitch said this yesterday while announcing that the Government had also re-introduced the additional profits tax (APT) just to ensure that the State benefited from higher revenue enjoyed by operator of the PNG LNG project ExxonMobil and its partners most of whom are major oil and gas companies.

He said the proponents of the LNG project had met with the Government thinking that the Government would give in easily to the operators and hoping to attain a best case scenario of only having to pay a corporate tax of 30 per cent as introduced by the Government in 2003.

The APT was in place when Bougainville Copper Limited was still operating the Panguna mine and was cancelled in 2003 to attract more investors in the mining and petroleum sectors.

"With many global companies enjoying super profits, the Government believed that it would be untenable if the PNG Government and people were unable to share in what could potentially be windfall revenues and profits from LNG exports," Mr Pruaitch said. "As a result we have re-negotiated for re-introduction of the additional profits tax (APT) and ExxonMobil has accepted this outcome."

With the APT, in addition to the corporate tax that every company in PNG faces, the LNG consortium will be required to pay an additional 7.5 per cent when the project’s internal rate of return exceeds 17.5 per cent and an additional 10 per cent when it exceeds 20 per cent.

"By some estimates the Government’s total tax take from this project would amount to between $US25 billion (K71.1 billion) to $US30 billion (K85.3 billion) over the 30 year life of the project," Mr Pruaitch said.

He also brushed aside landowners’ claims that they were left out in the project benefits. The recent gas agreement was between the State and the developer and now the task would be to consult all landowners and other stakeholders on the benefits and other issues in relation to the LNG project.

Mr Pruaitch said during the front end engineering and design (FEED) stage of the project, which the partners announced, the Government would ensure that consultations continued with the landowners and the affected provincial governments that would take into consideration landowners’ needs and demands.

"Such discussions can be progressed in a meaningful way because of the framework the Government has set in place," he said.

"I can assure you that the consultations that are going to occur, particularly with landowners, will be the most exhaustive ever carried out in this country and it will be a model for many future projects in the years ahead.

"The scale of this project makes such consultations essential because the basis must be provided for this venture to proceed smoothly once construction begins."

Papua New Guinea Post-Courier:

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