Tax breaks introduced by the government are encouraging companies to extend the search for discoveries to new areas
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| The number of new exploration wells has increased sharply over the past year |
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ncentives
introduced to attract investment into the petroleum sector have given
a major boost to exploration in Papua New Guinea. “Exploration
spending has increased from £53 million to £187 million
in the last year,” says Sir Moi Avei,
Minister for Energy and Petroleum.
Incentives include a reduction in the corporate tax rate from 45 to 30 percent and removal of an additional profits tax on new petroleum developments before 2017.
The search for oil is being extended to areas outside the Southern Highlands, where oil sector activity has been concentrated up to now. Interest is also being expressed by companies from countries other than Canada, which has been at the forefront of exploration in PNG in recent years. In November last year, China signed a memoranda of agreement to explore investment opportunities in both petroleum and mining.
Papua New Guinea’s biggest oil and gas company, Oil Search, plans to spend more than £112 million on exploration and development activities this year, an increase of 67 percent. This will enable the company to drill several new exploration wells and to make a start on the North West Moran and South East Manada fields, which are believed to have recoverable oil reserves totalling approximately 90 million barrels.
Last year, Oil Search became the operator of all the oil producing projects in PNG, following its acquisition earlier in the year of Chevron Niugini Ltd., the PNG subsidiary of US energy giant ChevronTexaco. Oil Search, which is 18.25 percent state owned, is also the operator of the Hides Gas Project, which it has managed since 1998.
Papua New Guinea’s crude oil sold at an average price of US$28 (£15.2) per barrel in 2003. This has increased the government’s collections of petroleum taxes and, together with increased production from Moran, has stimulated growth in the petroleum sector in Papua New Guinea for the first time in four years.
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The launch of the Napa Napa oil refinery – PNG’s first – is expected to give a significant boost to the country’s overall economic performance. Built by InterOil Corp. of Canada, which is also involved in oil exploration in PNG, it is the single largest investment project undertaken in the country.
Positioned close to Port Moresby, the only sheltered, deep-water harbour in the region, the refinery will process 32,500 barrels of crude oil per day once in full production. Its fuel products, including petrol, diesel, kerosene and aviation fuel, will be sufficient to supply PNG’s entire domestic market, removing the need for expensive importing from Singapore and Australia.
More than a third of the volume will be left over for export. Shell Overseas Ltd. Holdings is contracted to purchase the majority of the refinery’s production and BP Singapore is the exclusive agent for all crude oil supply to the refinery.
PNG has many undeveloped gas fields with proven and probable reserves of 14 trillion cubic feet. A plan to construct a 1,800-mile gas pipeline linking PNG with Australia would bring a number of these fields into commercial production. If it goes ahead, the pipeline will be the longest in the southern hemisphere.
New refinery will process 32,500 barrels of crude oil per day
The Highlands Gas Project aims to transport huge quantities of natural gas from PNG’s Southern Highlands to a processing facility for LPG extraction and then on to customers in Australia. The project is operated by Esso Highlands Limited, a subsidiary of ExxonMobil Corporation, Oil Search and Mineral Resources Development Company (MRDC) and Nippon Oil Exploration Ltd.
ExxonMobil has been pursuing potential customers in Queensland and Australia’s southern states and several conditional agreements have been signed. Sir Moi Avei has expressed confidence that the project will soon prove commercially viable.
According to the Minister, an American/ Indonesian consortium has expressed interest in building another proposed gas pipeline, from the central highlands to Wewak on PNG’s northern coast.
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