Gas and petroleum in Papua New Guinea: a sector profile


A profile of the gas and petroleum sector in Papua New Guinea, including information on licensing and taxation, key players and major projects.

The LNG tanker ‘Papua’ loading at the PNG LNG project’s marine terminal. Credit: ExxonMobil/Richard Dellman

Industry snapshot

Petroleum licences in PNG as of November 2020. Credit: Dept of Petroleum

The petroleum industry in Papua New Guinea is the nation’s largest export industry. Liquefied natural gas (LNG) exports were K12.8 billion in 2018, which was 52.6 per cent of PNG’s total exports, according to the Bank of PNG. Hydrocarbon condensate exports were K2.1 billion and crude oil exports were K941 million.

Papua New Guinea became a significant player in the gas industry in April 2014, when the PNG LNG project, which is headed and operated by ExxonMobil, commenced production. In its first year of production, the US$19 billion project produced over 6 million tonnes of LNG and delivered 87 cargoes. Output increased to an annualised rate of 8.8 million tonnes per annum (MTPA) in the second half of 2018.

The project’s gas is sourced from seven gas fields: Hides, Angore and the Oil Search-operated Juha, Kutubu, Agogo, Moran and Gobe. Gas is also purchased on a third-party basis from the SE Gobe field. More than 9 trillion cubic feet of gas is expected to be produced over the PNG LNG’s 30-year life.

A second major project is the proposed US$13 billion Papua LNG project, which is headed by French major Total. The project will use gas supplied from the Elk-Antelope fields located in the Gulf Province. The gas is to be liquefied and purified at two facilities to be built at ExxonMobil’s PNG LNG plant in Port Moresby, each with a capacity of 2.7 million tonnes.

It is estimated that the project will have the capacity to produce 5.4 million tonnes of LNG per year. An important part of the agreement was ensuring that a share of this capacity will be allocated to domestic supply. Total will hold a 31.1 per cent stake in the venture, with ExxonMobil having 28.7 per cent and Oil Search 17.7 per cent. The remaining 22.5 per cent will belong to the PNG government, allowing the state to buy into the project at a later date.

The project is estimated to have five million tonnes per annum capacity. In October 2019, the PNG Parliament passed 10 Papua LNG Project Amendment Bills to formalise the project going to the next stage, Front End Engineering and Design (FEED).

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A related proposed project is the P’nyang field, which is located 130 kilometres northwest of Hides, the main PNG LNG field in the Highlands. The aim is to share infrastructure with the PNG LNG project, specifically a third train (T3).

The participants in the P’nyang project will be Oil Search and ExxonMobil (36.9 per cent, Santos (14.3 per cent) and Merlin Petroleum Company (11.96 per cent). The Petroleum Retention Licence 3 (PRL 3), which includes the P’nyang field, is valued at US$1.3 billion (K4.43 billion). Should the Papua LNG and P’nyang projects go ahead, it is expected to double PNG’s output of LNG to 15 million tonnes per year.

In August 2020 Oil Search announced a two-year delay in its proposed expansion of liquefied natural gas in Papua New Guinea. In September 2020, the Marape government announced that it would be negotiating the Papua LNG and P’nyang projects separately.

Another project is the Pasca LNG project in the Gulf of Papua, which will be PNG’s first offshore gas field. A Ministerial Determination signed in October 2019 allows Twinza Oil to move towards development. The government has commenced negotiations with Twinza on the fiscal terms that will apply to the development. The project is expected to supply 220,000 tonnes of LPG (liquefied petroleum gas) annually, of which 55 per cent will be condensate and 45 per cent will be LPG.

Some other prospective, although smaller, ‘stranded’ (not connected) fields for gas production are in the Western Province. These are the Stanley, Elevala/Ketu, Ubuntu, Puk Puk and Douglas fields. Operators Talisman Energy (a subsidiary of Spain’s REPSOL) and Australia’s Horizon Oil estimate the potential output could be 1.5 million tonnes per annum.

Kumul Petroleum Holdings Ltd (KPHL, formerly known as the National Petroleum Company) administers the government equity share in oil and gas projects. It holds the country’s 16.6 per cent stake in the PNG LNG project and will hold 22.5 per cent of the proposed Papua LNG project. The company used to be involved in exploration but the Marape government has instructed KPHL to become the government’s anchor investment company, only participating in equity and project investments.

Petroleum exploration in Papua New Guinea started before World War 1. However, drilling only moved inland with the advent of the large helicopter in the 1960s. The first commercial oil discovery was made in 1986 and the first production in 1992. In recent years, PNG’s crude oil output has been in a slow, but steady, decline.

Governance and legislation

The petroleum industry in PNG is governed by the Oil and Gas Act 1998 under the administration and management of the Department of Petroleum and Energy (DPE).

In June 2020, the Parliament of PNG passed the Oil and Gas (Amendment) Bill 2020 to amend the Oil and Gas Act 1998. This allows the Minister to impose a ‘minimum expected level of return’ for the State on the licensee. What the level of return might be, how it would be calculated and how it would be enforced are not prescribed. The Minister may refuse to grant a production licence (PDL), even where a current licensee has discovered petroleum and the licensee submitted a valid application. The scope of petroleum and gas agreements has been reduced, so that these agreements can no longer be used to regulate the application of laws to a project and the State is no longer strictly required to comply with its obligations under agreements with applicants.

The Marape government has also signalled its intention to move to Production Sharing Contracts (PSCs) rather than the previously used Royalty Tax arrangements.


Different licences are provided for under the Oil and Gas Act. Each has different rights attached to it. All licence applications may either be granted or refused by the Minister following a review of the application.

A Petroleum Prospecting Licence (PPL)  is solely for exploration activity and is granted for an initial term of six years. A five-year extension can be granted if the work program has been satisfactory.

Petroleum Retention Licence (PRL) gives the licence holder the right to explore for petroleum and carry out field studies to obtain information to ensure timely economic development of the gas field for five years.

Petroleum Development Licence (PDL) gives the licence holder the right to explore for petroleum, carry out operations for the recovery of petroleum and sell, or otherwise dispose of, the petroleum recovered for a period of 25 years.

A Pipeline Licence (PL) gives the licence holder the right to construct and operate a pipeline along the route specified in the licence.

A Petroleum Processing Facility Licence (PPFL) gives the licence holder the right to construct a petroleum processing facility at the site and conduct operations for petroleum processing through the petroleum processing facility.

All applications for PPL, PRL or PDL must be submitted to the Director of the Department of Petroleum and Energy. The Minister will, after considering a report from the Petroleum Advisory Board (PAB), make a decision about the application.

The petroleum licenses regime in PNG is currently under review. This includes all PPL, PRL and PDL. The review is directed at stopping potential abuses within the licencing process.

For a map of current petroleum licences, click here.

Midstream/downstream processing

The Napa Napa refinery near Port Moresby, which was commissioned in 2005 by InterOil, was PNG’s first, and to date only, refinery. In mid 2014, Puma Energy acquired InterOil’s downstream business, including the refinery, for US$525.6 million.

Puma Energy has currently invested US$180 million into improving safety, new wharves and jetties; upgrades of the refinery, new tanks, and improving logistics management.

To encourage the development of a petrochemical sector, land adjacent to the PNG LNG Plant in Caution Bay outside Port Moresby has been set aside for the Konebada Petroleum Park.

Tax incentives

There are a number of incentives for the petroleum sector, including an income tax rate of 30 per cent for certain petroleum projects, and two per cent royalties. Dividends paid from petroleum income are exempt from income tax and dividend withholding tax; interest paid by a resource project to a non-resident lender is exempt from income tax and interest withholding tax.

Special provisions apply to determine allowable deductions for allowable exploration expenditure (AEE) and development or allowable capital expenditure (ACE). Expenditure incurred during the exploration phase of a project under an exploration licence is categorised as exploration expenditure (EE). EE that is incurred up to 20 years prior to the issue of a development licence qualifies as AEE.

Capital expenditure incurred after a development licence has been issued is categorised as ACE. The amount of the deduction for AEE is limited to the amount of income remaining after deducting all other deductions, other than the deduction for ACE. The AEE deduction cannot be used to generate a tax loss.

Petroleum and gas companies are required to estimate their tax liability by 31 March of each year. Tax on this estimate is then payable in three instalments – 30 April, 31 July and 31 October.

An Additional Profits Tax applies to all resource projects. It potentially applies to a resource project in the year in which the accumulated value of net cash receipts becomes positive.

Information resources

Useful Publications

  • Profile, published every other year by the PNG Chamber of Mines and Petroleum
  • Business Advantage PNG, online PNG business magazine published by Business Advantage International
  • PNG Report, published by Aspermont

What else would you like to know?

This sector file is a living document created as a service to our subscribers. It is updated from time to time, as new information comes to hand.

Is there something else you’d like to know about this sector? Is there new information we haven’t included? Let us know in the Comment section below, or email and we’ll look into it.

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