The Pasca Gas project is a step closer to its actual commencement in a few years’ time after the government and developer, Twinza Oil (PNG) Limited, came to terms in an agreement on the benefits packages for country and the developer.
Petroleum Minister, Kerenga Kua, announced this afternoon that the state through the State Negotiation Team (SNT) secured a 55% total benefits package in the proposed Pasca Gas Project in the Gulf province following a successful final meeting last week between the SNT and Twinza Oil.
Twinza Oil will have a 45% package in this project.
The minister, while outlining the outcome of the meeting and benefits to come from the deal struck between the two parties, explained that the 55% is based on an oil price of 50 dollars a barrel; however, this could change for the better depending on the oil price.
“The good news is oil price has gone up seventy- six dollars per barrel, so that’s bonus for us. If it stays there long enough it can take our total benefits package well above fifty- five, because there is room for increment depending on high oil price and its sustainability over time,” said the minister.
The breakup of that 55% total benefits package will see 2% royalty to go to the Gulf provincial government. Minister Kua explained that since the project will be on the sea some 95kilometers offshore south of the province, no landowner will benefit but this does not mean that the people will not.
The 2% royalty will be used by the Gulf provincial government to look after the needs of the people.
Kua said what is important to note here is that it will be a 2% royalty of gross production and not of net deduction, meaning that it will be without deduction and the whole amount from that 2% will be received in full.
This was insisted in the meetings between the parties because of past experiences where landowners do not get much from royalties because of net deductions.
The minister said the state has done something quite new as well in the agreement, which was to secure 5% production levy. He explained that the Oil and Gas Act has no provision for entitlements for a production levy.
This is something new that has been created out of the Pasca Gas project that will be beneficial for the country moving forward.
“So that’s a big plus, early revenue. This one we’ve had to give away dividend withholding tax to secure this one because if we chase the dividend withholding tax, we will have to wait until the following financial year and that denies us money in real time when we need it.”
Also, from the 55% benefits package, 2% development levy will go to the provincial government, 15% additional profit tax, 5% for Domestic Market Obligation (DMO) and then 30% for the normal corporate tax.
The deal for the Pasca Gas project was hailed as a big achievement for Papua New Guinea (PNG) because despite its life span of just 12 years, the benefits will be great given that the benefits packaged secured is higher than that of the other gas projects, like the PNG LNG project.
Twinza Oil Country Executive Director, Mr. Erick Kowa, said the deal now completes the negotiations with PNG to pave way for the execution and signing of the Pasca Gas project agreement, which is expected to take place on the 29th of this month.
After the actual agreement signing, Twinza Oil will go to work on the project construction phase. The first production is expected to take place in 2024.
Picture: Minister Kua addressing the press conference on the agreement reached between Twinza and the state at the Manasupe House, Port Moresby.