A REVIEW of Papua New Guinea’s laws governing petroleum licensing has found few licence holders – including some publicly listed companies – are complying with regulations.
Mining minister Byron Chan presented the outcomes of the review at the 13th PNG Mining and Petroleum Investment Conference and said he was “not proud of the findings”, saying drastic improvements were needed.
“The assessment has concluded that there is clear evidence of lack of commitment, non-compliance and default by many licence holders,” Mr Chan said.
“Many licence holders are not doing serious exploration work, there are prolonged delays in technical reports, statutory reports and geological data, and delivering on work programs – even licence fees are not paid on time.”
The review had covered all forms of petroleum exploration licence issued by the PNG Government with 50 of the 100 active petroleum prospecting licences (PPLs) issued having been found to be not in good standing.
“They have unfilled work programs and expenditure commitments, they have outstanding technical reports including statutory, biannual and annual reports,” Mr Chan said of the various issues found with the licences.
Mr Chan said a total of K15.6 million was also owed to the state in outstanding fees and penalties, with K13.6 million of that owed by active petroleum prospecting licence holders.
“This amount will increase as we continue to impose penalties on late lodgment of outstanding statutory reports,” he said.
The review found only one of 10 active petroleum development licences were in good standing, while only seven of 13 active petroleum retention licences (PRLs) were satisfactory.
Mr Chan said there was a damaging trend whereby licence holders were seeking variations of licence conditions to “warehouse” acreages instead of developing them as the state expected.
“The intention of why the minister grants a licence is taken for granted by some of the licencees,” Mr Chan said.
“What I am interested to see is companies genuinely interested in committing themselves to undertaking quality work.”
He said the lack of adherence to regulations was the result of “complacency and possible ignorance” and that it was concerning that potential penalties did not seem to be a deterrence for non-compliance.
He said he would make improving PNG’s petroleum licensing system his “key focus” for 2015, and outlined steps the government would take to improve the shaky system.
Mr Chan said the Oil and Gas Act would be amended to “increase all compulsory prescribed fees [and]…penalty rates for offences in the Act”.
Potential licencees will be required to pay bond fees to the PNG government before a licence would be granted, with the bond refundable two years after the licence is granted, “subject to non-compliance and default guidelines”, he said.
“Financial guarantees, which are a regular exercise at this point in time will no longer be accepted,” Mr Chan said.
“Any applicant with an unrealistic work program with no financial capacity will be refused outright, any applicant without the financial capacity to pay the bond fee will be refused.”
Mining Act review
PNG Chamber of Mines and Petroleum president Greg Anderson said the government was continuing its work reviewing the Mining Act to update it for current conditions.
He said there were “a number of quite major issues relating to tenements and equity issues” to be dealt with.
“There are new areas like offshore policy because we’ve got Nautilus’s [new offshore mining project] of course – the government has got to deal with that as a completely new thing,” Mr Anderson said
“We’ve got geothermal which is a completely new area, in terms of a policy…there are becoming much wider opportunities for geothermal.”
He said while operators’ mine closure practices were “world class” it was yet to be enshrined in legislation, and the review would change that.
Mr Anderson said “intense discussions and meetings” were ongoing and a deadline of 31 March had been set for the review, with the hope that legislation changes would reach Parliament by June.
“There’s the Mining Act and there’s six policies that underwrite the act and they’re all being completed and we’re making quite good progress on that,” he said.