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Port Moresby, 25 July 2025 — Prime Minister James Marape has welcomed the International Court of Justice’s (ICJ) landmark advisory opinion on climate change, delivered on 23 July, calling it a “monumental victory for climate justice” and a major step forward for Pacific nations like Papua New Guinea. The advisory opinion, requested by the United Nations General Assembly, affirms that states have a legal obligation under international law to reduce greenhouse gas emissions. It further states that failure to act may constitute an “internationally wrongful act,” opening the door to legal accountability for climate inaction. “This ruling reinforces what Pacific nations have long championed: a clean, healthy and sustainable environment is a fundamental human right,” said Prime Minister Marape. “It is a landmark for climate justice and for sovereign island nations like Papua New Guinea, whose very existence is under threat.” The ICJ concluded that countries must act decisively to curb emissions from fossil fuels and reconsider policies such as exploration licences and fossil fuel subsidies. The court also suggested that nations suffering climate-related harm may be entitled to reparations, provided a causal link can be established. Although the opinion is non-binding, it carries significant legal and political weight, especially in the lead-up to COP30 in Brazil. “This advisory opinion is a monumental victory for climate justice,” said Marape. “It vindicates the voices and sacrifices of Pacific communities standing at the frontline of sea-level rise, extreme weather and biodiversity loss.” Prime Minister Marape also underscored PNG’s long-standing record on environmental protection and climate leadership. “Papua New Guinea has long stood against environmental harm — from rejecting deep-sea mining to championing Indigenous-led ocean reserves. This ruling empowers our efforts to safeguard our marine and forest ecosystems for future generations.” He called on high-emitting nations to meet their international responsibilities. “We urge all nations — especially historic emitters — to honour their legal obligations and commit to urgent, equitable climate action. The era of delay and denial is over. The law is now clear.” Following the ICJ’s opinion, Papua New Guinea intends to deepen its engagement on the global stage. The government plans to use the ruling to strengthen diplomatic pressure during climate negotiations, explore legal avenues to reinforce environmental commitments and pursue strategic partnerships for climate finance and conservation efforts. Marape said PNG would continue to lead by example through its moratorium on environmentally destructive activities and its commitment to inclusive, sustainable development. Prime Minister Marape has consistently taken strong positions on environmental and climate issues. He remains a vocal opponent of deep-sea mining, citing risks to fisheries, fragile ecosystems and community livelihoods. In June, he advocated for the Melanesian Ocean Reserve and Indigenous-led conservation at the UN Ocean Conference in Nice. In September 2024, he called for stronger international recognition of the threats posed by sea-level rise during the UN General Assembly’s 79th session. Marape said the ICJ’s advisory opinion aligns legal authority with moral leadership, giving Pacific nations powerful leverage in their ongoing struggle for survival and justice. PM Marape said this legal breakthrough now provide authoritative backing for PNG’s climate agenda, “aligning moral leadership with international law to protect our people, nation and Pacific region.”

Kumian, Eastern Highlands — The Conservation and Environment Protection Authority (CEPA) Environment Council conducted an official site visit to the K92 Mining operation on Thursday 17 July 2025. The delegation underwent a site safety induction and received a comprehensive overview of K92’s operations presented by Chief Executive Officer John D. Lewins and Director of Sustainability and ESG Michael Flynn. The presentation covered the Stage 3 Expansion, which is scheduled to begin commissioning in the second half of Q2, the Stage 4 Expansion and ongoing exploration efforts to identify new deposits and resources. Lewins reaffirmed K92’s commitment to sustainable growth, responsible resource development and meaningful community engagement. He also highlighted the Company’s significant economic contributions in 2024, which included: PGK 155 million in corporate tax (approx. USD 41.9 million) PGK 51 million in payroll tax (approx. USD 13.8 million) PGK 34 million in royalties and MRA levies (approx. USD 9.2 million) PGK 617 million in capital projects (approx. USD 166.6 million) PGK 64 million in exploration (approx. USD 17.3 million) PGK 11 million on community programmes (approx. USD 3 million) PGK 372 million in local procurement (approx. USD 100.4 million) These figures are expected to increase further in 2025, including over PGK 800 million (approx. USD 216 million) forecast in capital expenditure to complete the Stage 3 Expansion, which is anticipated to more than double gold and copper production. The delegation toured the new processing facility where Lewins explained each stage of the mill’s operations. Helicopter tours led by Environment Manager Kapi Lumbi provided further insight into the Company’s activities. The visit also included a tour of the existing Tailings Storage Facility and associated infrastructure led by Michael Hawkins, Principal Sustainability. K92 senior staff supporting the visit included Johan Botha (Deputy General Manager), Allen Koops (Principal, Camp Management), Peter Torot (Manager, Health and Safety), Palizo Abori (Superintendent, Environment) and Stanley Komunt (General Manager, Community Affairs and External Relations). The CEPA Environment Council delegation comprised Prof. Simon Saulei, Prof. Kaul Gena, Dr Eric Omuru, Tom Pringel, Susan Yakip, Esmalyne Tau, Pitz Murphy, Michael Wau and Robert Sine. The visit concluded successfully, strengthening collaboration between CEPA and K92 Mining and highlighting a shared commitment to responsible mining and environmental sustainability.

Port Moresby — Prime Minister James Marape has announced the appointment of Gerea Aopi as the new hairman of the board of Kumul Petroleum Holdings Limited (KPHL) as the government moves swiftly to address serious governance concerns raised in a recent Australian media report. Aopi’s appointment was made prior to the emergence of these allegations but Prime Minister Marape stated that the timing now presents an important opportunity for the new chairman to lead a full and independent review of the issues raised. “Gerea Aopi is a man of experience, integrity and professionalism in the oil and gas sector,” said the Prime Minister. “He has been appointed to lead the Kumul Petroleum Board at a time when our national oil and gas company needs credible, steady leadership to uphold its integrity and reputation.” The Prime Minister confirmed that he has written to the media outlet in question requesting all materials and investigative findings relating to the allegations. He has also reached out to the Managing Director of Kumul Petroleum, Wapu Sonk, requesting a formal response and clarification on the matters raised. “As trustee shareholder I have a responsibility to protect the interests of our country and our people,” said Marape. “The letter to the managing director will seek clarity on his position in light of the issues reported.” At the same time, Marape urged the public to exercise restraint in passing judgement. “These matters were raised by the Australian press and are now under international scrutiny. But let me be clear — Mr Wapu Sonk, like any citizen, is innocent until proven otherwise. In the past Papua New Guinean leaders have been wrongly scrutinised in the media only to be vindicated later. One such example is the successful legal challenge brought by Minister William Duma.” “This is not a witch-hunt. It is about governance, transparency and protecting the reputation of Kumul Petroleum which is a key institution of our economy and has international relationships to maintain.” The prime minister stressed that all State-Owned Enterprises (SOEs), their chief executive officers and department heads must operate to the highest standard of ethical conduct. “If you are entrusted with leading a state institution — whether as a departmental head, CEO or managing director — your personal and professional conduct must be beyond reproach. There is no room for impropriety. Our SOEs must be models of transparency and good governance.” He emphasised that in the modern world, particularly in countries like Australia and Papua New Guinea, all financial transactions leave digital footprints and are subject to scrutiny. “In today’s global economy, no transaction goes unseen. Every financial movement can be traced. If these allegations have any merit, they will be proven. If not, then they will be dismissed. But either way we must allow proper processes to take place.” Prime Minister Marape also called on Papua New Guineans — including those active on social media — to refrain from making personal attacks or engaging in premature speculation. “I appeal to all citizens, especially those on social media, to refrain from rushing to judgement or publishing personal opinions without facts. Kumul Petroleum’s reputation is at stake and so is the national interest. We must protect that reputation while the investigation proceeds.” He acknowledged that the matter is a setback especially as the Government has been actively lobbying for greater international investment in PNG’s energy sector. “This unfortunate episode comes at a time when we are engaging with global partners to expand PNG’s oil and gas capacity — including projects like Papua LNG, P’nyang and Pasca A. It is vital we restore trust and credibility as soon as possible so that our development ambitions are not undermined.” Marape concluded by reiterating the Government’s commitment to acting firmly, fairly and transparently. “This matter must be resolved quickly, clearly and professionally. I expect a preliminary report on my desk when I return to Port Moresby on Wednesday. The people of Papua New Guinea deserve accountability and the Government will ensure that this issue is handled with integrity and in the national interest.”

Minister for International Trade and Investment Richard Maru has declared his full support for the proposed 90-megawatt Kaugel Hydropower Project in the Southern Highlands Province, calling it a “transformational project of highest national priority.” “The proposed K2.5 billion (USD 625 million) project, which will take four years to construct, has my highest support. This is a transformational project. We have a very high demand for cheaper, clean and reliable electricity in our country not only for our people but importantly to drive economic growth,” Maru said. The minister called on all stakeholders to collaborate with the project’s proponents — including Kaugel Hydro Limited, landowners and the respective Provincial Governments of Southern Highlands, Enga and Western Highlands — to unlock the project’s potential and prioritise it for development. “The Kaugel Hydropower Project is precisely the scale and quality of foreign direct investment PNG must prioritise. This hydro can provide long-term electricity to Porgera Mine, the proposed Baiyer and Ruti SEZ, Mt Hagen City and parts of Southern Highlands Province,” he said. Maru also underscored the need for reliable electricity in the Highlands region, citing the deteriorating condition of the existing grid infrastructure including the Yonki hydro scheme, which is no longer able to meet demand. “Persistent power outages stifle growth, deter investment and hold our people and country back from progress and development,” he said. The minister also stressed the importance of securing broad community support and equitable benefits, especially for landowners and provincial governments involved. “Clearly, we have to secure a social license for the project by securing clear landowner equity participation and business spin-off benefits, the participation in equity by the respective Provincial Governments and other benefits. These are critical issues that must be handled carefully and sensitively,” Maru stated. According to the minister, the Kaugel Hydropower Project aligns with national goals for rural electrification, industrial development and the shift to low-emission energy systems. He thanked Kaugel Hydro Limited Managing Director Karl Yalo and his team for their continued efforts to progress the project. “We wish them every success to secure anchor customers to make the project bankable and we also hope that they can secure license from the National Energy Authority,” said Maru. He added that his ministry and department remain fully committed to supporting the project. “My Ministry and Department stands ready to champion this potential high impact and transformational project to demonstrate the unwavering commitment of the Marape-Rosso Government to renewable energy transition, equitable distribution of benefits and setting the foundations for a better and brighter future for our people and country as we celebrate 50 years of independence and chart our way forward for the next 50 years,” he said.

Prime Minister Hon. James Marape has hailed the inaugural air shipment of Morobe-grown coffee to Dubai as a “monumental breakthrough” for Papua New Guinea’s agricultural exports, marking a powerful step forward in unlocking the full economic potential of rural communities and affirming the Government’s commitment to commercialising agriculture. Speaking in Port Moresby on the occasion of the official export departure, Prime Minister Marape praised the milestone as a profound gift to the nation during its 50th year of independence. “Today, we are not just sending coffee to the world — we are sending a message: Papua New Guinea is ready to compete in global markets with the best of what our people grow,” Prime Minister Marape said. “This airfreight shipment of premium Morobe coffee to Dubai is not merely a trade transaction. It is a symbol of our farmers’ resilience, our land’s richness, and our government’s ambition to transform agriculture into a powerful engine of economic growth.” The shipment, spearheaded by local agribusiness AFIA PNG, included an initial 30 bags of specialty Morobe coffee, with a further 91 bags prepared for subsequent deliveries. The consignment was flown directly from Port Moresby to Dubai, showcasing PNG’s growing capacity to meet international demand through airfreight logistics. “This is history in motion,” the Prime Minister said. “We commend AFIA PNG and the Morobe Provincial Government for their visionary leadership. This is what it means to take back PNG — by empowering our people, our products, and our provinces.” Prime Minister Marape said the Government’s focus under the National Agriculture Sector Plan (NASP 2024–2033) is to support exactly such models of innovation and export-led growth. He reaffirmed his government’s intent to replicate the AFIA approach across all agricultural regions. “Let me be clear — what AFIA PNG has achieved must not remain an isolated success,” Prime Minister Marape stressed. “My government will work to expand this model to other provinces. We want to see vanilla in East Sepik, cocoa in East New Britain, oil palm in Oro, rice in Central, and fisheries in Manus and Milne Bay reach global markets with the same success.” He said that PNG’s growing agricultural exports are being supported by major infrastructure investments across the country, including new and upgraded roads, bridges, ports and airports. “For instance, this coffee is utilising a brand-new airport facility,” the Prime Minister explained. “We are restoring our Air Niugini fleet, and by September this year, we should have new aircraft that will not only serve domestic destinations, but also connect Papua New Guinea to international markets.” “Our investments in infrastructure — roads, ports, bridges, airports — must be complemented by our people producing goods for markets both near and far,” he said. “Our chocolate, our cocoa, continues to maintain markets in Europe, and our oil palm is sustaining its place in international trade. This export to Dubai is a strong signal that we are heading in the right direction.” Prime Minister Marape said the Government’s development priorities are interconnected, with parallel investments in electricity, ICT connectivity and logistics meant to spark productivity and support exports. “Exporting overseas will ensure remittances flow back into our country. We want to fix what I consider a weakness — exporters not bringing the remittance earnings back into Papua New Guinea. Kina must find its rightful place in the global market. Bringing export earnings in foreign currencies back into Kina will boost its value.” He said the Government is making a concerted effort to help people produce and sell to overseas markets, and to ensure that these transactions benefit the broader economy. “We are serious about creating wealth from our land and seas — and putting it directly into the hands of our people.” The Prime Minister said the shipment also sent a powerful signal to international buyers and investors about the quality, ethics, and distinctiveness of Papua New Guinea’s agricultural products. “In an era where the world demands traceability, ethical sourcing, and environmental responsibility, PNG stands out — not only for the uniqueness of our crops, but also the integrity of our communities,” he said. Prime Minister Marape concluded by declaring the Dubai shipment as one of the most meaningful developments of PNG’s Golden Jubilee. “As we celebrate 50 years of independence, this coffee export represents the new direction of our country. We are no longer just a resource economy — we are now a producer, exporter, and competitor in value-added agriculture,” he said. “To AFIA PNG and the people of Morobe: thank you for giving Papua New Guinea a gift of pride and purpose. The world now awaits our harvest.”

Port Moresby, 24 July 2025 – Prime Minister James Marape today welcomed Anna Bjerde, managing director for Operations at the World Bank, to Papua New Guinea for high-level discussions on the country’s development progress, fiscal reform and enhanced partnership with the World Bank Group. Bjerde, who was accompanied by senior World Bank leadership, commended Papua New Guinea’s positive economic trajectory and acknowledged the Marape Government’s commitment to fiscal consolidation and economic reform. During the meeting, Marape highlighted the significant upscaling of World Bank support to Papua New Guinea — from US$475 million in 2023 to US$709 million in 2025. This increase reflects growing international confidence in PNG’s reform agenda and underscores the country’s strategic importance in the Pacific region. The Prime Minister acknowledged the World Bank’s crucial assistance in key sectors such as energy, education, youth employment, rural service delivery and human capital development. Among the flagship projects discussed were: A US$204 million renewable energy project supporting clean and green energy access A US$160 million education sector project to strengthen learning outcomes and expand access A US$100 million second phase of the Rural Service Delivery Project to improve basic services in remote areas Ongoing urban and youth-focused programmes in Lae, NCD and other urban centres “These investments are not just about infrastructure — they are about improving lives, creating jobs and lifting our people out of poverty,” Marape said. Marape reaffirmed his government’s target to return to a balanced budget by 2027 — the first since 2010. He noted that over the past five years, the national budget deficit has been reduced by approximately K1 billion each year, and that this trend will continue into 2026. “We are charting a bold path to economic independence. After 2027, our focus will shift from borrowing to aggressive debt repayment, and by 2033–2035, we aim to be debt-free. By 2045, we want to be a net contributor to the World Bank and IMF, not just a borrower,” the prime minister said. He also briefed Bjerde on the Government’s economic vision, which he previously shared with the IMF’s Deputy Managing Director in Washington, reaffirming PNG’s commitment to grow the economy through trade rather than aid. For her part, Bjerde welcomed Papua New Guinea’s ambitions and acknowledged the Government’s progress. She also commended the country’s strong fiscal direction and pledged the World Bank’s continued support, including in debt restructuring and climate resilience efforts. She also expressed interest in supporting the Government’s broader goals of labour mobility, education partnerships and poverty alleviation, while reaffirming the World Bank’s readiness to collaborate on clean energy expansion and environmental protection. Marape expressed appreciation for the World Bank’s growing engagement in Papua New Guinea and extended an invitation to host the President of the World Bank in a future visit. He stressed that partnerships must be grounded in long-term impact, not short-term relief. “Our ambition is clear: to grow our economy, create more opportunities for our young people, protect our environment and become a stronger, more independent nation that contributes to the global development community,” he said.

PORT MORESBY — In a landmark move for cultural preservation, the Gulf Provincial Government has become the first in Papua New Guinea to financially align with the National Cultural Commission (NCC), reinforcing a shared commitment to protect and promote the nation’s diverse traditional heritage. On 4 July 2025, at the NCC head office in Port Moresby, Gulf Provincial Administrator Clement Tare officially handed over a K80,000 (approximately USD 21,600) cheque to NCC Executive Director Steven Enomb Kilanda. The funding marks the province’s state party contribution towards completing the Toare Cultural Centre — a major community-driven project based in Toare Village, Gulf Province. Kilanda welcomed the partnership as a “historic milestone” for PNG’s cultural sector. He also expressed appreciation to Gulf Governor Chris Haiveta and Administrator Tare for their firm commitment to culture. This support, he said, will ensure the Centre’s proper completion, operation, and future cultural programmes in the province. Jointly developed by the NCC and UNESCO, the Toare Cultural Centre forms part of a broader initiative to have the Toare Mask Culture nominated for inscription on UNESCO’s Urgent Safeguarding List. With the Gulf Provincial Government’s K80,000 (USD 21,600) contribution now secured—adding to NCC’s initial support of K20,000 (USD 5,400)—the project is on track for completion. The Centre is scheduled to officially open on Friday, 11 July, with the Annual Toare Mask Festival taking place from 12 to 13 July. Administrator Tare commended NCC’s grassroots-led approach, saying the Centre would become a “beacon of pride” for the people of Gulf and serve as “a powerful tool for youth education and cultural revival.” He pledged continued support, including further financial assistance for the Toare Mask Festival and other heritage initiatives. “Our commitment reflects a broader vision to place culture at the heart of community development and identity restoration,” Tare said. This three-way partnership among the Gulf Provincial Government, the National Cultural Commission, and UNESCO marks Papua New Guinea’s first provincial-level cultural development collaboration of its kind — setting a new precedent for provinces across the country. As the official opening draws near, the Toare Cultural Centre stands as a powerful symbol of cultural unity, government leadership, and international cooperation, safeguarding PNG’s irreplaceable heritage for future generations.

 Michael McWalter picks up his prior discussions of petroleum sector reform (Issue No. 3 2024) and describes in more detail exactly what a Production Sharing Contract, or what a PSC, is all about. In my commentary of PNG Business News, Issue 2, 2023 entitled: Petroleum Sector Reform for Papua New Guinea, I wrote about the need to apply better governance to the sector to achieve optimal outcomes for the State. In particular, I spoke of the need for the petroleum revenues arising from petroleum resource development to be deployed wisely for the benefit of the people of PNG on capital formation activities like: education, health, social welfare, infrastructure, etc. – all of which should promote the National economy to grow, and thus improve livelihoods.  This translation of the value of resources with appropriate management into sustainable development is often called the value chain, and each aspect of the chain needs most serious and competent management.   There is little point in mobilising one’s natural resources to make an income for the State, if that money is not put to good purpose, but rather wasted one way or another by folly or malady.  Those resources may only be produced once, and not again; they are finite and have value now at such time as that kind of resource is sought after in global markets. We must remember that there may come a day when oil and gas are no longer consumed with such avid demand as today. This might eventuate as more investments are poured into the development of renewables sources of energy and advancements are made with cleaner nuclear fission and sustainable thermonuclear fusion. Oil and gas might become a quixotic, antiquated and outmoded source of energy, and thus attract considerably less value.  So, if a government is going to foster investment in petroleum exploration and development, it needs to embrace such grave and important responsibility to ensure that the Nation’s petroleum business is conducted most professionally and with total accountability. Government must ensure that the resultant revenues from subsequent production are appropriate, reasonable and respected as being derived from the overall patrimony of the people of the Nation.  This requires investment by the State in professional excellence to manage, moderate, administrate and regulate the sector and its operations firmly and fairly.  The oft cited National Petroleum Authority (NPA), which was first defined in the Government’s 1976 White Paper on Petroleum Policy and Legislation by two of our greatest leaders, Sir Michael Somare and Sir Julius Chan, has been repeatedly conceived, only to be still born. Into that vacuum, Kumul Petroleum Holdings Ltd, PNG’s de facto National Oil Company (NOC) has steadily and bravely taken the lead and embraced National development in the oil and gas sector, and all that it entails. Meantime, the Department of Petroleum and Energy has valiantly tried to keep up with ever increasing core and essential petroleum sector functions, like licensing, operational approvals, and data collection, whilst otherwise becoming absorbed, and perhaps overwhelmed, in the peripheral though, absolutely essential tasks of dealing with project area landowners, their benefit claims and their many other concerns and worries. Plans for a NPA have been formulated in great detail several times over in the last few decades, only to be forsaken, lost, sidestepped, and derailed time and time again. The whole notion of the NPA was to bring together a cadre of PNG excellence to lead the petroleum sector as the guardian of PNG’s petroleum resources. The members of that cadre were to have been well-paid for their experience and important responsibility, and as an Authority of the Government, the NPA might have been able to retain and attract some of PNG’s finest graduates in such exciting and challenging work.   I also discussed the vital need for the commerciality of petroleum developments without which investment by the industry in field development would be withheld.  I discussed how the 2020 amendments to the Oil and Gas Act imposed a test on a proposed petroleum development project that the applicant’s proposals should reflect a minimum expected return to the State over the life of any recovery of petroleum. However, that minimum expected return to the State is not specified in law and is only examined and determined by the Petroleum Advisory Board (PAB), and then considered by the Minister at the time of application for a development licence.  This leaves investors with great uncertainty and unnecessary risk throughout the period of exploration, appraisal, development planning and the application phase of petroleum resource development.  There is thus now no absolute certainty of development if a discovery of commercial extent is made. Either the PAB or the Minister may set a threshold minimum expected return to the State during the consideration of an application for development. This is at a very late stage in the cycle of petroleum resource development investment and comes just before the investing companies have to elect to develop their discovered petroleum accumulation, or not. If a field development is marginally economic, the setting of such a minimum expected return to the State might in some circumstances make corporate consideration of development uncommercial, and as a consequence the field might be left undeveloped. In any normal distribution of petroleum accumulations, there are a few large fields, a fair number of medium size fields and many smaller fields. It would not be wise to disadvantage the development of smaller and often smaller marginally economic fields, which tend to be developed after the larger fields have been found and produced, and which can readily sustain a domestic petroleum industry populated by smaller, and likely, local companies with smaller investments.  Oddly, as I said in 2023, the potential introduction of Production Sharing Contracts (PSCs) would obviate such a risky situation because the terms of development are normally locked into a PSC when originally negotiated and agreed between the State and the investing companies as contractors to the State at the outset. Being a contract, any capricious demand by the State for unexpected returns on petroleum development pursuant to a PSC would end up with the contract being the substance of legal proceedings.  I now want to pick up on my themes of a year ago and discuss optimal and necessary arrangements for petroleum development in the light of some creeping petroleum policy change in recent years, and a keen desire by the Government to change the PNG petroleum regime and to adopt the use of PSCs. I particularly wish to demystify PSCs. Figure 2: Much has been written on PSCs. Celebrated analyst, Daniel Johnston, is prominent with his simplified mapping of fiscal and commercial regimes. King & Spalding, an American multinational corporate law firm, has also written a most comprehensive book on the topic, ex libris McWalter.   WHAT ARE PRODUCTION SHARING CONTRACTS?   The notion of a Government sharing the production of oil and gas arising from the development of a successful petroleum exploration campaign by companies as part of a commercial venture was first developed and employed in Bolivia in the 1950s. A Production Sharing Contract (PSC) is an arrangement between a host Government and an international oil and gas company (IOC) for the division and allocation of the oil and gas produced between those two parties under a contract which provides for the exploration for and the development and production of petroleum resources. The allocation of a share of the production to the IOC serves to recompense the IOC for its investment and to provide a reasonable reward for its success. The Government, as owner of the resources, also provides a mechanism called a cost recovery allowance to the contractor for its work, but keeps the rest of the petroleum produced. The PSC was introduced in Indonesia in 1966, and PSCs of this kind or variants of the same are used extensively to agree the arrangements for oil and gas exploration, development, and production with oil and gas companies. PSCs of one kind or another are used in over 40 countries, throughout the world.   The PSC is not the only manner by which a government may grant oil and gas exploration, development and production rights to commercial investors and gain a share in the value of successful petroleum production.  Prior to the development of the PSC, exploration and production of oil and gas was typically governed by way of a licence or a concession agreement, and such regimes still remain in effect in many different places around the world. In many developing nations, the PSC is now the most common means by which a government allows corporate investment in the oil and gas industry. It provides a company or consortium of companies the right to explore and produce oil and gas.  In many jurisdictions, there are political or nationalistic reasons for the adoption of PSCs as they perceptibly provide the Government with greater and more direct control over its resources and the ability to exert National sovereignty over the industry more readily.   After gaining independence in 1945, Indonesian’s concessions regime came under attack by certain nationalist groups leading to the nationalisation of Royal Dutch Shell’s assets. Indonesian Law 44/60 abolished the old concessionary system and specified that: “Oil and gas mining shall only be carried out by the State and implemented by State enterprises,” and further that, “the Minister may appoint other parties as contractors of the State enterprises.” Alas, a decline in foreign investment in Indonesia’s oil and gas sector inevitably ensued. To mitigate this decline, the government eventually negotiated and agreed in 1962 with the Pan American Indonesia Oil Corporation, a subsidiary of Standard Oil of Indiana (later to become Amoco), a new contract based on legislation that was much more favourable to the Government.  The other large foreign petroleum investors, Caltex (a venture of Chevron and Texaco), Shell, and Stanvac (a venture of Socony [Standard Oil of New York] and Vacuum Oil and Standard Oil of New Jersey, later to become Exxon) followed by signing Contracts of Work in September 1963. These early PSCs were widely considered to be less controversial than the previous concessions system, as they enabled the government to maintain formal ownership of the resources until sold, while permitting the IOCs to exploit them for and on behalf of the Government. These contracts provided for the recovery of the costs of the contractor up to an agreed percentage of overall production plus an agreed, but often scaled, share of the produced oil and gas as a reward for its investment. Although often cited as the example of the use of PSCs, in 2017, in a somewhat odd twist, the Indonesian Government established a new form of PSC called the Gross Split PSC. This completely abolished cost recovery systems pioneered in the classic PSCs of the 1960s. Instead, this new arrangement simply relies on an agreed split of the actual production between the Government and the IOCs, typically 43% to the contractor for oil and 48% to the contractor for gas production, with the balance of production going to the Government. Due to a loss of faith in Pertamina (Indonesia’s national oil company) in the late 1990s (an audit had shown that Pertamina had allegedly lost about US$6.1 billion from inefficiency and corruption in 1997 and 1998) the Indonesian Government took steps to rein in control of the industry at the Ministry level, but they had no financial ability to manage the proceeds of the sale of oil and gas which were remitted to the revenue account of the National government.  Without any retained funds, this then entailed the Ministry having to seek parliamentary appropriations to pay the cost recovery allowances to the IOCs, but then the Indonesian Parliament questioned these payments. This brings home the need to think through the implications of changes in regime and the management of any given regime, especially if one is contemplating changing from a licence or concessionary regime to a contractor-based one. What is a PSC? In a PSC, a government makes a contract with an IOC to provide the necessary and requisite financial, technical, management, environmental, social, planning and logistical skills in order to explore for, and hopefully, if successful in finding oil and gas accumulations, to produce the oil and gas. The host State (that throughout most of the world, normally owns the subterranean resources) will usually be represented by the Government or a Government Petroleum Ministry, Department, Authority or quite often some other type of agency of the State, such as its National Oil Company (NOC), which will take delivery of the State’s share of production and generally manage the commercial aspects of the PSC. The IOC is typically granted an exclusive time-limited right to explore for petroleum accumulations, appraise any discovery, plan and execute development and produce oil and gas within a defined area, generally known as the contract area. Under the PSC arrangement, the IOC bears the entire risk of the project, both technical and financial. If a commercial discovery is declared, the IOC becomes entitled to a portion of any subsequent petroleum produced as an effective payment for its efforts, in addition to recouping all its costs from the production. Conversely, if no discoveries are made, the IOC receives nothing. The Government retains ownership of all the oil and gas produced, save for what oil and gas is allocated to the IOC as cost recovery petroleum, or is the subject of sharing between the IOC and the NOC as profit petroleum. This causes the Government to be involved in selling its share of the produced oil and gas.  In some jurisdictions, the IOC is allowed to keep the physical oil for itself, and the IOC makes just cash payments only to the NOC, based on the sale of the NOC’s petroleum entitlements; in others, physical oil and gas allocations are used to reward the IOC. The extent to which the NOC is involved with the exploration, development and production process varies from country to country with some NOCs seeking to take a significant lead in the business other than a just managing the PSC, whilst other NOCs take only a small participating interest in the commercial venture, so as to be within the operating consortium and to learn from it. There are commonly four key financial aspects to a PSC: royalty, cost recovery petroleum, and profit petroleum, though many other relevant matters are agreed in the PSC. Figure 3: Contents of a PSC: A sample from Equatorial Guinea, after the Republic of Equatorial Guinea, 2006    Royalty Most often and foremost, the IOC is typically expected to pay a prescribed or agreed royalty as a percentage of the gross value of oil and gas production to the State as valued at the point of export from the contract area. The royalty is often, at the State’s option, taken as a physical share of production, or alternatively by way of a payment by the IOC equivalent to the sale price of the State’s royalty share of production. Sometimes, the percentage rate of royalty may be the subject of bids for a contract area by competing oil and gas companies when bidding for the same or similar areas.  Royalty is a payment made in kind or related to produced volumes and price without regard to the profitability of the business. Therefore, in times of low petroleum commodity prices it has the effect of digging deep into profitability.  However, for a host Government, royalty is an assured payment regardless of profitability, but proportionate to the value of the produced oil and gas. Cost Recovery Petroleum Following payment of any royalty, the IOC is normally entitled to a pre-determined maximum percentage of gross production from which it may recover all its genuine costs, with any costs not recovered being carried forward to the next accounting year. Such production is known as cost oil and cost gas, and again may be taken in cash or kind. Obviously, the IOC attempts to maximise cost recovery early in the cycle of production up to the agreed maximum percentage limit, so as to recoup its expenses soonest, and likewise the Government will scrutinise the costs submitted to it for recovery as to their genuine eligibility. That scrutiny involves approval of all procurements and sub-contracts of the IOC, and represents an enormous accounting burden for the Government.   Profit Oil The oil and gas remaining after the payment of royalty to the Government and the cost recovery allowance to the IOC by the host Government is known as profit oil and profit gas, and it is generally divided between the IOC and the Government in accordance with the production sharing provisions agreed and defined in the PSC. Quite often the Government’s share of profit oil and profit gas increases as the production rates increase. Income tax Finally, the IOC is quite often required to pay income tax on its share of net benefits which should strictly amount only to profit oil, as cost oil and cost gas represent only a recoupment and recovery of costs. However, the application of income tax varies from jurisdiction to jurisdiction and in some cases the IOC’s notional income tax due is often paid by the NOC, or the State on behalf of the IOC, such that there is no financial impact on the IOC, there being just a journal entry between different parts of the Government. An income tax superposed on the PSC regime without appropriate tax deductions can rapidly make a fair PSC regime become a very hostile one.  In the calculation of the net take to the State under a PSC, one has to include the results of any Corporate Income Tax and all and any other taxes, levies or imposts that affect the outcome of the overall PSC.  In some PSCs, there is simply no tax, and the royalty, cost oil and gas, and production share are deemed to be final fiscal devices. Figure 4: It must be noted that the production or profit oil split is not the same as the overall net take to each party, after Daniel Johnston in International Petroleum Fiscal Regimes and Production Sharing Contracts      Government Involvement The objectives of the parties when negotiating a PSC and its terms will generally be diametrically opposed.  An IOC will strive to negotiate for itself as much independence and control as possible over operations, and it will want any State intervention in the running of the project to be kept to a minimum. Naturally, it will be keen to keep its costs low, by negotiating the highest cost recovery allowance and the largest production share it can, and it will seek the full recovery of all its costs. The Government will wish to have an overall say in the development of its resources in an orderly and systematic manner that creates synergies for future development. The Government will also wish to make as much money as possible, reduce cost recovery allowances, and have access to an IOC’s resources and relevant expertise, without spending much time and money. The Government may also have economic priorities for domestic petroleum supply to its economy to mitigate energy import requirements and obviate foreign exchange requirements. Throughout the contract from exploration to development to production, the Government will want to ensure that the IOC is undertaking a technically appropriate exploration work programme with appropriate levels of investment and that the exclusive right to access land or the offshore area is being used efficiently. In addition, the Government will typically be concerned to secure as many rights and benefits for the people and local businesses, including affected local communities, as possible.  This is generally accomplished by the optimisation of jobs and training for local workers through requirements to use local goods, services and contractor and subcontractor services as far is feasible and practical – this is what is typically called local content. Figure 5: The main elements of a PSC, after Hassan Harraz, Tanta University, Egypt, 20106   Why the PSC Model? The obvious advantage of the PSC model for a government is the minimal risk on its part throughout the value chain of the enterprise. It is thus able to reap the benefits of its natural resources without having to spend its own time and money even for development. This is not to say that the State does not pay. It inevitably pays for its share of all and any costs of exploration, development and production through the cost recovery process payable to the Contractor. In most cases, the Government will not have the technology needed to explore for and produce oil and gas, and so contracting the help of an IOC that has the appropriate skills, capacities and technology is usually necessary in order for the Government to exploit its natural resources optimally, especially in the offshore areas. The same is, however, also true for licence and concessionary arrangements where even if the host Government has an equity option to take up a participating interest in a petroleum development project it will still pay for at least its pro rata percentage share of sunk and past exploration, appraisal and development planning costs up to the point of the establishment of facilities for development and the commencement of the recovery of the petroleum. As and when exploration proves to be successful, the Government can secure long-term supplies and/or exports of oil and gas in a PSC regime, which it can trade as it sees fit. The long-term nature of a PSC enables the Government to predict future levels of oil and gas for domestic use, export and to make provisions in the national budget accordingly. Alternatively, the PSC model can be most lucrative for the State, if it takes the option of taking its share of production as a cash payment, rather than in kind. It is also very common for PSCs to contain provisions that as the production rate increases, the proportion of the production attributable to the Government may also increase, meaning that a significant and increasing proportion of the value of profit oil is paid to the host Government and its representative entity defined in the PSC. In all cases, at the initial stage of petroleum resource development, the IOC bears substantially all the financial risk. If, and only if, exploration proves successful and the discovered oil and/or gas accumulations are developed and produced, the IOC may be able to recover its costs through cost oil and/or cost gas and an agreed share in the profits of the remaining quantity of oil and gas. As to whether the PSC model is more favourable to the State than to IOCs in contrast to the licence or concessionary system, ultimately depends on the rates used for the various fiscal and commercial parameters in each system. In a concessionary regime, costs are only recovered slowly as depreciation allowances against assessable income. The speed of the recovery of costs depends entirely on the terms set by law and those allowed to be negotiated in the framework of a PSC. It may or may not be possible for an IOC to negotiate the terms of a PSC with more, or less financially and commercially attractive terms for petroleum development than a licence or concession arrangement might otherwise have offered under a prior regime. It is all about the terms of the selected regime, whichever is applied. Figure 6: Some terms of the petroleum regime may still be contained in legislation whilst others will be negotiable depending on the particular regime, after Daniel Johnston in International Petroleum Fiscal Regime and Production Sharing Contracts.     One possible negative aspect of the PSC model is that it is an agreed and contractual arrangement, and not the product of binding and enforceable legislation. Thus, any breach of the PSC by either party will constitute a breach of contract for which civil relief may be obtained.  Pursuant to the PSC model, the State always remains the owner of the resources, with the contract establishing the applicable compensation arrangements and level of NOC or Government involvement in the asset. The negotiation of a PSC is up front before any investment is made in exploration by the IOC, so the terms are locked in.  PSCs tend to afford IOCs less freedom to run an asset, with Contractors being subject to restrictions and required approvals in addition to those contained in the applicable legislation and regulation. Commonly Used Alternatives to the PSC There are several substantial alternatives to the PSC model. The differences in these alternatives are mainly in relation to the level of control granted to the IOC, the level of involvement of the NOC, and the compensatory arrangements for the investment made. Licences Generally, under a licence arrangement, there is normally little scope for an IOC to negotiate specific fiscal or commercial terms in relation to its exploration and production rights. Licensing regimes and their terms and conditions are typically standardised and embedded in legislation, such that the terms of each licence are near identical. This regime is most common in developed countries, e.g. UK, Norway, the Netherlands, and Australia. The terms of licences may change from time to time as the Government seeks to restrain or encourage sector investment.  The IOC is typically granted complete control over the contract area and complete ownership over any oil and gas that it successfully produces. Unlike PSCs, where ownership of the resources always remains with the State, in licence regimes ownership generally passes to the IOC at the wellhead, with the IOC’s profits from the sale of the oil and gas produced being the subject to general tax legislation, or specific petroleum taxation legislation. Like in PSCs, if the IOC fails to find commercially producible oil and gas within the limited terms and periods of their licence, they go home empty handed.  In some jurisdictions, the Government has an entitlement to join in at the development stage when the risks of finding oil or gas have been mitigated and it may either chose to pay its proportionate share of costs of exploration and development and participate alongside the IOCs, or be carried in some form or another. This can be a very profitable feature for the Government, but it essentially takes a slice of the venture away from the IOC venture at the proportionate sunk costs only, without any regard or compensation for the commercial value of any oil and gas discovered by the IOC. Concessions A concession arrangement is generally subject to a greater level of negotiation than a licence. The IOC is typically granted proprietary rights over the contract area and complete ownership over any oil and gas that it successfully produces, subject to the payment of a royalty and income tax, each of which may vary in rate depending on the level of production as negotiated and agreed. There may be specific taxes like the Additional Profits Tax (APT) which progressively applies further amounts of tax, the greater the rate of return of the production project. In some jurisdictions, licences have become more concession-like as the terms and conditions of the licences have increasingly become the subject of Agreements with the Government defining those agreed terms which are supplementary to or adjust the current and applicable legislation as sought by and agreed by both the Government and/or the IOCs. Service Contracts Under a service contract, the IOC provides its technical services to the State to explore and develop oil and gas resources, and therefore in so many ways, it is similar to a PSC. However, remuneration to the IOC is usually by way of a service fee or payments based on the value of oil produced in US$ per barrel for oil and other hydrocarbon liquids, or per million British Thermal Units (BTU) of energy for natural gas. The term of a service contract is often very short, leaving an IOC with considerable risk and no guarantee of a long production period Services contracts are common in Iran, Iraq and Kuwait and have also been used from time to time in Indonesia and the Philippines. The Overall Picture By and large, about half the world’s petroleum prospective Nations use licence/concessional systems and about half use PSC arrangements, though many of each of these are strictly hybrids involving features of one regime and the other. No particular petroleum regime is superior to any other and much depends on the degree to which the host Nation wishes to promote or reduce exploration investment according to the terms applied. Sometimes, the IOC will tolerate a slightly tougher regime, if they know that it will be stable and well-implemented in a professional and organised manner. Good subsurface prospectivity and a consequent high chance of finding accumulations of oil and gas can often be spoilt by self-imposed surface risks. Factors that may induce surface risk are Governments that: successively make petroleum regime changes, politically drive or make unqualified determination of fiscal and commercial terms without regard to the ultimate take to each party in the case of success, and the poor governance of the sector in general leading to untimely and late decision making. Indeed, a good regime whether it be a PSC-type or a licence/concessional one, will depend on the enforcement of its terms and conditions and the values agreed for those terms and conditions that determine economic outcomes.  The great difference between PSCs and other arrangements is that PSCs keep control over the produced oil and gas and its sale and disposal with the State, whereas licences and concessions leave such matters and the fate of the industry more to the will and imperatives of the corporates.  The intrinsic control of a contractor by the NOC under a PSC means the Government has to be better equipped, more efficient and more knowledgeable to operate such a regime than under a licence or concessionary regime. The State or its representative (usually its NOC) needs to make the PSC work in its favour as it is the manager of the entire enterprise and needs to lead the way. Any failure to step up to such challenges will result in a poorly planned development of the industry with delays, unrealised synergies leading to lost production, and overall loss of value from the resources. No matter what regime is applied to the development of petroleum resources, there is no doubt that resolute and appropriate petroleum policy formulation and firm and fair administration of the sector will pay dividends for any host Government willing to invest in such. The definition of a petroleum regime is not a new game; it has been done many times across the world by many Governments and there is very sound collective advice on the subject which is relatively inexpensive to access compared to the enormity of the task and the value of managing a Nation’s petroleum resources optimally. Figure 7: The IMF has some excellent specialists in its Fiscal Affairs Department who advise Governments on resource regimes and it has often commissioned books and studies on such matters as in the excellent handbook on Administering Fiscal Regimes for Resource Industries by Jack Calder, formerly of the Oil Taxation Office of the UK, ex libris McWalter.    

Port Moresby, Papua New Guinea – Mayur Resources Limited has officially rebranded as Pacific Lime and Cement Limited, marking a major milestone in its transformation into a fully integrated supplier of building and industrial materia The name change reflects the company’s evolution from a resource explorer to an operator focused on producing lime, cement and downstream construction products. At the heart of this shift is the Central Cement and Lime (CCL) Project, located in Papua New Guinea. Key Highlights: Mayur Resources is now trading as Pacific Lime and Cement Limited The rebrand signals the company’s shift from early-stage resource development to project execution and operations Core offerings include cement, lime and building products for PNG and Asia-Pacific markets Leadership team brings decades of industrial project experience across PNG and Australia The CCL Project team includes senior professionals from top global cement and lime companies “This rebrand to Pacific Lime and Cement reflects our transformation into an integrated industrial materials company focused on nation-building in Papua New Guinea,” said Managing Director Paul Mulder. “The new name positions us clearly in the market as a supplier of cement, quicklime and processed building products, underpinned by our own quarry, processing plant, power, water and international wharf facilities, all within a dedicated Special Economic Zone,” Mulder said. He added that the CCL Project is set to become PNG’s first vertically integrated manufacturing hub for cement and lime. “Through the SEZ, we aim to expand downstream into concrete production, castings, bricks, pavers and other building materials—unlocking new economic and social development for the country.” Since its incorporation in 2011, the company has focused on high-impact development opportunities in PNG. Today, with early construction underway at the Central Lime Project and a final investment decision approaching, the company remains committed to supporting local infrastructure and regional exports. While lime and cement remain the core focus, Pacific Lime and Cement is also exploring adjacent opportunities in renewable energy, battery minerals, nature-based carbon and industrial development, all contributing to long-term nation-building goals. Despite the rebrand, the company’s PNG-based subsidiaries will continue to operate under the Mayur name, preserving long-standing relationships and stakeholder recognition built over the years across the country’s provinces and industries. Meanwhile, Pacific Lime and Cement is expected to begin trading under its new name and ticker symbol “PLA” on the ASX once administrative steps are completed. An announcement confirming the timing will follow. The company’s new website is now live at www.placltd.com.

Papua New Guinea’s mining sector took centre stage this week at the inaugural PNG Mining Seminar, held at the Akasaka Intercity Conference Centre in Tokyo. The event, co-hosted by Ok Tedi Mining Limited, marked a significant milestone in the enduring partnership between Japan and Papua New Guinea, showcasing the country’s untapped resource potential and inviting Japanese investors to join PNG’s journey of growth and development. Prime Minister James Marape and Minister for International Trade and Investment  Richard Maru both addressed the 60-person audience, which included Japanese smelter partners, industry peers and prospective investors. Ok Tedi Managing Director and Chief Executive Officer Kedi Ilimbit, who presented at the seminar on the mutual benefits of the PNG–Japan relationship, shared his vision for the future of mining in PNG: “This seminar marks a new chapter in our relationship with Japan – a country that has stood by Papua New Guinea for decades. We are proud to host this historic event and invite Japanese investors to walk with us into a future of shared prosperity,” Ilimbit said. “Ok Tedi is not just a mining company – we are a catalyst for change. We invest in growth, but we also invest in people, in communities and in the future of our nation.” Ok Tedi positioned itself as a partner of choice for Japanese investors seeking long-term, socially impactful ventures. “Papua New Guinea is a land of opportunity. Our resources are vast, our people are resilient and our potential is still largely untapped. We welcome partners who share our values and our vision,” Mr Ilimbit added. Kumul Minerals Managing Director Sarimu Kanu also attended the seminar and presented on the theme “Partnering to Build PNG Mines.” Key themes of the seminar include: Japan’s enduring partnership with PNG, built on decades of trust and trade PNG’s untapped potential in mining and infrastructure Social impact and inclusive growth, with Ok Tedi leading the way Strategic investment opportunities for Japanese stakeholders The event was co-hosted by the Japan Organisation for Metals and Energy Security (JOGMEC) and the Japan International Cooperation Agency (JICA), whose support reflects Japan’s strategic interest in PNG’s resource sector and the importance of regional cooperation for mutual growth.