Papua New Guinea: New regime a boost for gas pipeline - Australian Financial Review, Nov 17
One of the last major political hurdles to the development of the $3billion gas pipeline between Queensland and Papua New Guinea is about to be resolved with the adoption of a new fiscal and taxation regime in PNG.
The PNG Government is now expected to commit to new fiscal arrangements to apply to the 3,250-kilometre pipeline project within a fortnight.
Once PNG's fiscal arrangements are in place, the other challenges facing the project relate to getting enough Queensland gas customers to support the project, and PNG to secure sufficient support to finance its share of the pipeline.
The PNG Government hopes the Australian Federal Government will back its efforts to finance its stake in the project, either through additional aid funding or by direct credit.
Chevron Corp's PNG gas pipeline project director, Dr John Powell, told the Australian Gas Association's conference in Canberra this week that securing the PNG fiscal arrangements was the project's key priority. Securing the Queensland Government's commitment for two gas-fired electricity generation projects was also crucial to the pipeline's commercial success, he said.
Also, the final joint-venture operating agreement between the various project partners needed to be finalised with each partner committing to its final equity participation.
Under PNG's new tax and fiscal arrangements oil fields, such as PNG Kutubu, may be included within a gas project as oil production declines and gas output rises. This is what is happening at Kutubu, but oil production in PNG is subject to higher taxation rates than gas, impeding the commercial development of the remaining reserves.
Launching the PNG taxation review report late last week the PNG Prime Minister, Sir Mekere Morauta, said the inclusion of oil production within a gas field development "would be a major incentive to development of gas, which is essential if the petroleum industry as a whole is to survive [in PNG]".
In Queensland the PNG gas project marketing team must now start to lock in big customers.
Dr Powell said this week: "The Queensland Government needs to commit to the [two] power projects" to help support the pipeline project.
Chevron also requires Comalco Ltd, now wholly owned by Rio Tinto Ltd, to commit to a $1billion alumina refinery at Gladstone to act as a foundation customer. Comalco has already confirmed Gladstone as its preferred site for the refinery, but has been waiting for confirmation of the PNG gas pipeline development before finally committing to the refinery. |
