Industry changes afoot 4 min read
The Parliament of PNG has passed a series of amendments targeting the mining, oil and gas industries. We examine the significance of these amendments and the likely next steps.
In brief
On 10 June 2020, the Parliament of PNG passed the Mining (Amendment) Bill 2020 (the Mining Amendments) and the Oil and Gas (Amendment) Bill 2020 (the O&G Amendments). The Bills amend the Mining Act 1992 and the Oil and Gas Act 1998 respectively. The amendments will become operative upon certification by the Speaker of Parliament.
The Mining Amendments introduce a 'live data' reporting obligation and give State entities priority in tenement applications over 'reserved land'. The O&G Amendments give the Minister greater flexibility in determining whether to grant or refuse petroleum development licences (PDLs) and affect the sanctity of petroleum agreements and gas agreements.
Key takeaways for the mining industry
Land reservation
The State is given the power to reserve land that is the subject of an expired, cancelled, surrendered or relinquished tenement. Upon the revocation or expiry of the tenement, wholly or majority-owned State entities are given priority over other applicants for the grant of new tenure over the reserved land. The Mining Amendments also provide that:
- land reservations do not affect pre-existing applications; and
- disputes regarding reserved land provisions must be settled in PNG under PNG laws.
Live data reporting
Every operating mine in PNG must provide 'live data' on mineral production, extraction and sales, and must submit all mineral and geological data and information to the Mineral Resources Authority. These obligations are in addition to extensive information rights of the State already in force. The limits of the new obligations are not clear, which is concerning given that failure to comply with the obligations is an offence. This new regime raises both confidentiality and logistical issues. The State may view this new disclosure regime as a natural corollary of the land reservation mechanism.
Key takeaways for the oil and gas industry
Minimum return for the State
Where petroleum production under a PDL proposal would likely be of 'national significance', the Minister may impose a 'minimum expected level of return' for the State on the licensee. What the level of return might be, how it would be calculated and how it would be enforced are not prescribed in the O&G Amendments. Existing PDL applicants may be subject to these amendments if the Minister has not yet granted their PDL.
Refusal of PDLs
The Minister may refuse to grant a PDL, even where a current licensee has discovered petroleum and the licensee submitted a valid application. Further, the O&G Amendments:
- reduce the procedural fairness and transparency associated with a refusal in these circumstances (eg the Minister is no longer required to give the applicant the opportunity to consult with the Minister regarding a proposed refusal); and
- no longer contemplate the applicant being able to seek arbitration, even where an arbitration regime has previously been agreed between the applicant and the State.
Again, existing PDL applicants may be subject to these amendments if the Minister has not yet granted their PDL.
These amendments create uncertainty for licensees as to:
- whether a PDL will be granted if they make a commercial discovery; and
- the fiscal regime that would apply to any future development if a PDL were granted.
Weakened petroleum agreements and gas agreements
The scope of petroleum agreements and gas agreements has been reduced, so that these agreements can no longer be used to regulate the application of laws to a project (eg to fix a fiscal regime for the life of a project).
The State is no longer strictly required to comply with its obligations under agreements with applicants, and before doing so must consider certain matters.
While the O&G Amendments suggest that existing petroleum agreements and gas agreements are not affected by these amendments, it is unclear what is to happen where such an agreement specifically regulates the grant of PDLs or arbitration. That is, it is not clear which prevails between the existing agreement and the new provisions of the Act, which makes the grant of PDLs less certain and reduce the applicant's recourse where the grant of a PDL is refused.
Next steps
- The Mining Amendments do not implement the more substantial suite of amendments that were foreshadowed in the draft Mining Bill 2019. Accordingly, it is possible the Mining Amendments are only the first tranche of a broader reform package, and additional reforms, including those in the draft Mining Bill 2019, may still be passed.
- In his introduction of the O&G Amendments to Parliament, Minister Kua stated he would be introducing a new bill to move away from the current concession-based licensing system to a production-sharing arrangement, for both the mining and petroleum industries. While consistent with previous comments of the Minister, this would be a fundamental change to resource development in PNG.