PNG Gas Update
Investing in PNG
Due to concerns about the lack of exploration activity in Papua New Guinea, particularly in the drilling of exploration wells, and the projected steep decline in oil production from the existing Kutubu, Gobe and Moran oil fields over the period 2003-2010, the Government has introduced special fiscal terms that are to provide an incentive to the industry to explore.
Those special terms are styled as "incentive rate petroleum operations".
Fundamentally, incentive rate petroleum operations will be subject to a revised income tax of just 30% of taxable income. This is a significant decrease from normal petroleum operations, the income of which is currently assessed at 50% of taxable income for petroleum projects established prior to January 1st 2001 and 45% for projects thereafter.
The new 30% rate of taxation will be available for petroleum operations pursuant to a Petroleum Development Licences granted on or before 31st December 2017. To qualify for this incentive rate, companies need to be granted a petroleum prospecting licence within the designated period of 1st January 2003 to 31st December 2007.
It is hoped that during this five-year period, petroleum companies will apply for and be granted new licences undertaking aggressive exploration programmes that would lead to new discoveries. As our standard licence provisions are for an initial six-year term followed by a five-year extension (in respect of half the area), the incentive programme will cater for discoveries throughout the life of such new Petroleum Prospecting Licences.
We hope that these provisions will reward new and renewed investment by the petroleum companies in exploration. Their reward will be a significantly reduced tax on eventual petroleum production emanating from these new licences... full article
Last Update: 20 September, 2003