Regulation Of LNG Projects In Papua New Guinea

Oil and gas specialist Michael Sullivan, Partner at Leahy Lewin Lowing Sullivan Lawyers, PNG European Union Business Council President and Science & Technology Council of Papua New Guinea Member commented recently on the regulation of liquified natural gas (LNG) projects in PNG. Michael noted that there are no LNG specific laws or regulations or special LNG licences, as such, relating to the development of LNG projects in PNG.

LNG projects are regulated by the Oil & Gas Act 1998.

The State did however, offer the developers of PNG’s first LNG project, the Exxon Mobil-led PNG LNG Project a number of very attractive incentives to get that project up and running. The PNG government has indicated that future LNG projects will not get such an attractive deal.

For each petroleum project and gas project, the State enters into a separate petroleum agreement or gas agreement with the licensee in accordance with Section 183 (Petroleum Agreement) and Section 184 (Gas Agreement) of the Oil and Gas Act.

In the case of a gas agreement, the agreement provides for:

?       the definition of the extent of a particular gas project and gas operation for the gas project, for the purposes of this Act and any other law;

?       the transfer and assignment of a State equity interest in that gas project to the State or its nominee; and

?       any other matters relating to that gas project or those operations, agreed to by the parties to such agreement which, without limiting the generality of the foregoing, may include:

a)     the application of particular provisions of the Oil and Gas Act to that gas project and those operations; and

b)     where permitted by other legislation, the application of particular provisions of that other legislation to that gas project and those operations.

Once executed, a petroleum agreement or a gas agreement entered into under Section 183 or Section 184 has effect in accordance with its terms and notwithstanding any other provision of the Oil and Gas Act.

This gives the State the flexibility to introduce a separate fiscal and commercial regime for every petroleum project and gas project in PNG if the State wants to do so.

For guidance please contact Michael Sullivan at Email: [email protected] or call Mobile: +61-414-863-333 or +675 3203333

Leahy Lewin Lowing Sullivan Lawyers:  Level 5, MRDC Haus Corner Champion Parade and Musgrave St, Port Moresby, Papua New Guinea