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‘Sovereign wealth funds’ to protect gas revenues

PORT MORESBY, Papua New Guinea (PNG Post-Courier, June 30, 2010) - The first Papua New Guinea – Australia LNG [liquid natural gas] Ministerial meeting will be held in Melbourne tomorrow to discuss the establishment of sovereign wealth funds as a vehicle for management of revenue flows from the PNG LNG Project.

"I welcome this opportunity to work with the Australian Government to set up a framework for transparency and good governance in the management of future LNG revenue flows," the Minister for Public Enterprises, Arthur Somare, said yesterday.

The official PNG delegation will include Foreign Affairs and Trade Minister, Sam Abal, National Planning Minister Paul Tiensten, Public Services Minister Peter O’Neill and Commerce and Industry Minister Gabriel Kapris.

The Ministerial delegation will discuss possible Australian assistance for the creation of a transparent governance regime covering taxes and dividends received by the PNG Government from the LNG project. "The Government needs to have these measures in place before the LNG revenue starts to flow in about five years’ time," Minister Somare said.

Under a Joint Understanding signed with the Australian Government late last year PNG requested that Australia help set up an effective and transparent governance regime for LNG project revenue to provide international credibility for a challenging undertaking.

Besides creating "a transparent, robust legislative framework", the Australian Government has also agreed to co-opt a team of international economists to carry out economic modeling on the impact of the US$15 billion PNG LNG Project. The specially created econometric model would provide the National Government with a clear picture of the likely development impacts from sectoral spending generated from LNG revenues.

Mr. Somare said studies by the Department of State Enterprises supported a proposal to place dividends from the National Government’s 16.6 percent equity stake in the PNG LNG Project in an offshore Infrastructure Fund.

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