10/06/2022
#5
*Relevant Policies: The National Energy Policy 2017-2027 and the drafted PNG Mining Policy plus other recognized legislation with regards to downstream processing of PNG's Extractive Resources.
1) NATIONAL ENERGY POLICY 2017-2027
Natural gas, crude oil, refined petroleum products, other hydrocarbon products, natural gas liquids, and goods derived from fractionation of natural gas liquids are all considered energy products.
The overall objective of the policy is to ensure a cost-effective, competitive,
sustainable, and reliable energy supply to meet national and provincial
development objectives while also safeguarding and conserving the environment.
“Papua New Guinea’s governing laws on the industry include: the Constitution
of the Independent State of Papua New Guinea, Independent Consumer &
Competition Commission Act 2002, Electricity Industry Act 2002, Oil & Gas
Act 1996 and the Mining Act 1992. There are other key supporting legislation
though that provides a cumbersome and loose legal framework within which the
energy sector operates.” A legislation worthy of mentioning here is the PNG
vision 2050.
On page 6 of the National Energy Policy, under the segment on ‘Energy Security’
strategy (a) states; “Promote oil & gas downstream processing for domestic
energy needs”. Also, under the segment on Petroleum Refining (p. 22), the two
points mentioned were as follows;
1: “The Puma Energy - owned Napa Napa Oil refinery was at one stage refining
36,000 bpd of crude oil. The refinery produces Jet A-1, diesel and gasoline. The state is determined to encourage competition in the oil refinery sector in order to achieve efficiency and low unit cost of production, which should be transferred to the end users and this is fundamentally crucial for the Government in growing the national economy. Currently the refinery is not operational”.
2: “The State would encourage local refineries to purchase domestically produced
crude and that the price of feedstock crude shall be equivalent to cost of
production and transportation plus a 10 percent margin.”
However, while on that it is important to take note of the following points as
directly quoted from the document under the segment on “Import/Offloading
Facilities at Napa Napa” (p. 22):
PNG’s only oil refinery, the Napa Napa oil refinery located outside of Port Moresby has a
processing capacity of about 36,000 barrels a day. By industry standards, this is a very
small refinery. The refinery currently imports both crude oil and refined petroleum products. Currently the refinery is not operational. The State would like to encourage competition in the petroleum fuels market, hence competition in the entire value chain of the fuels market from refinery to retailing will be promoted.
3: The State shall use its best endeavours to secure domestically produced crude at Kina price as feedstock to transfer cost benefits to the national economy.
There were certain pages in the document that emphasized on the challenges in downstream petroleum and their associated strategies. Pages 25, 26, 27, 28, 30, 31, and part of page 32 to be specific. However, the pages that are worth looking
at in general terms are pages 87 to 88. Because these pages emphasized ‘downstream processing of the petroleum sector’ including the challenges and strategies.
2) PAPUA NEW GUINEA MINING POLICY (Drafted)
This Policy Manual should be studied in conjunction with the Mining Act 1992 (and any subsequent amended amendments) and any other mining sector policies that pertain to the exploration, operation, management, and regulation of the mining industry in Papua New Guinea.
The purpose and aims of the as quoted from the document are as follows:
PURPOSE
**To promote Papua New Guinea as an investment destination for mineral exploration and mining, and
**To ensure that mining in Papua New Guinea is conducted in a socially, economically and environmentally sustainable manner.
AIM
**To encourage investment in the Papua New Guinea mining sector.
**To create opportunities for local participation in the benefit sharing for the state, landholders, and for all Papua New Guineans and
**To regulate the mining activities so they are done in socially, economically, and environmentally sustainable manner.
Page 12 of the document, under part 19 emphasized local downstream processing of minerals. The 4 points outlined in the drafted policy and directly quoted are as
follows:
1. Of all minerals extracted in PNG, one third (1/3) shall be processed onshore not less than six (6) months before delivery to the refinery, provided that a processing plant is built and has the capacity to;
(a) Produce internationally acceptable products (including London good delivery bars of gold),
(b) Provide fully and adequate security for mine products at all stages of production, storage and delivery,
2. The processor shall comply with the terms and conditions commercially competitive with those available internationally thereof, in pricing and time of delivery of refined products,
3. There shall be no interference with the developers existing contracts with other external refiners that were entered into in good faith,
4. The contract shall be negotiated in good faith and renewed on an annual basis.
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