Tag Archives: EITI

Owners Of Extractive Companies To Be Identified

Post courier | 10 July 2018

Work is underway to identify beneficial owners of extractive companies operating in Papua New Guinea, says the PNGEITI multi stakeholder group (MSG).

The PNGEITI is cooperating with an international auditing firm KPMG as the implementation manager to execute a beneficial owners (BO) roadmap.

The roadmap is aimed at establishing a reporting matrix to feature beneficial owners in PNGEITI reports starting 2020- as required by the EITI International.

A beneficial owner in respect of a company means the natural person or persons who directly or indirectly owns or controls a corporate entity. A beneficial owner ultimately profits from the company’s activities, or controls the company’s activities. It is never a company, other legal entity, or a nominee or proxy, says PNGEITI.

“By 2020 companies applying for or holding a participatory interest in an exploration or production of an oil, gas or mining licence or contract in an EITI country must report the details of the beneficial owner (persons who own, control or substantially benefit from these companies and interests), as well as identifying any ‘politically exposed persons’ – these are politicians or officials or their family members or agents, with a direct engagement in regulating, setting laws, tax rates, negotiating contracts etc.”

“More than 50 EITI member countries have published their plans for how to disclose the real owners of companies in their extractive industries, which will require establishing legal and institutions arrangements for application, including establishing registers of such real owners,” said PNGEITI head of National Secretariat Mr Lucas Alkan.

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PNG Sweats On Meeting EITI Global Reporting Standards

Lucas Alkan and the 2016 EITI Report

Post Courier | May 1, 2018

Officials from the Extractive Industry Transparency Initiative (EITI) International Secretariat in Norway will be in the country today to begin a week-long consultation with relevant stakeholders for Papua New Guinea’s EITI validation.

PNGEITI head of National Secretariat Lucas Alkan said the officials will meet and consult with government agencies, extractive companies, civil society organisations, journalist and academics to gauge their feedbacks on EITI implementation to prepare PNG’s Validation report.

Mr Alkan said, “The purpose of validation is to drive reforms in the extractive sector, access performance and promote dialogue, identify opportunities to increase the impact of EITI implementation, identify opportunities for mainstreaming EITI implementation in government systems and safeguard the integrity of the EITI.

The validation will determine whether PNG has made meaningful progress in implementing EITI global reporting standards or have little or no progress at all.

“On behalf of the members of the PNGEITI multi stakeholder group and its chair Charles Abel, I am happy we have made progress in terms of inducing reforms either directly or indirectly through the EITI process,” Mr Alkan said.

Other government initiative such as the review of the Infrastructure Tax Credit Scheme and the Department of Finance review of Government trust accounts goes hand in hand with PNGEITI recommendations.

“These are the progresses so far and we want to see more done to bring about global best practices into the mining and petroleum sector for better management and use of revenues derived by the sector.

“Our desire for EITI in Papua New Guinea is long term- to making sure that EITI serves a useful function in the extractive dependent PNG economy,” Mr Alkan said.

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Transparency Initiative report calls for improved systems in extractive sector in Papua New Guinea

Sources of revenue from extractive sector to government. Source: EITI

Business Advantage | EMTV | 4 April 2018

The 2016 Papua New Guinea Extractive Industries Transparency Initiative report has found that improvements are being made to registry and payment systems in Papua New Guinea, but more needs to be done. It notes that budgeting for government revenues remains difficult because of the resources industry’s volatility, and the relatively small number of companies paying full tax.

The EITI report, which is produced by Ernst & Young, says that ‘in some cases, the absence of a robust system for managing government revenue payments in PNG leaves the system vulnerable to fraud, corruption, and human error.’

It found that the problem of transparency is amplified when payments to sub-national [provincial and district] governments are taken into consideration, noting that the Asian Development Bank has called for greater transparency in sub-national government resource revenue flows.

Budgeting

Budgeting for government revenues, the report says, from the extractive sector is ‘complex due to the revenue being subject to fluctuations in quantities produced and global commodity prices’.

A further issue is the high number of extractive companies that have some form of tax exemption.

‘Medium-term projections anticipate that corporate income tax (mining and petroleum tax) will come mainly from Ok Tedi, Porgera and the oil fields.

‘The Ramu Nico mine has a 10-year exemption from corporate income tax. The Lihir mine continues to undertake high capital expenditures which reduce its taxable income.

‘Low LNG prices, together with an accelerated depreciation allowance, means there may not be corporate income tax from the PNG LNG project.

‘In addition, key mines are claiming Infrastructure Tax Credits (ITCs).’

PNG oil and gas production. Source: EITI

Recommendations

The EITI report makes a number of recommendations. One was the implementation of a reliable electronic registry system to supersede the current paper ledger system.

The report noted that scanning of all documents has begun, but it will require additional resources to adhere to the EITI Standard.

‘The Department of Petroleum and Energy will need to provide information regarding licences awarded and transferred in previous reporting periods.’

Another recommendation has been that the Mineral Resources Development Company (MRDC) reports on the equity distribution and all other funds it holds in trust and invests for the landowners and for future generations.

It notes that there has been better information on payments and receipts, especially from the MRDC.

Making electronic payments, rather than using cash or cheques, is identified as a priority. The lack of a ‘robust system for managing resource payments leaves the system vulnerable to fraud, corruption and human error,’ the report says.

‘There were specific financial instructions from the Finance Minister for government agencies to heed this change and transition into electronic payments system where possible.’

Two other areas of focus are improving reporting on sub-national payments and ensuring that Memorandums of Understanding (MOAs) are made public.

Positive prospects

The EITI report says the medium-term economic outlook for PNG ‘remains positive, with foreign investments in the pipeline’.

It anticipates 2.8 per cent GDP growth in 2018, pointing to:

  • A gradual pick-up in the global economy, which is expected to boost commodity prices and stimulate activity in sectors outside resource extraction.
  • Increased output in mining.
  • Forecast growth in agriculture, forestry and fishery output of 3 per cent, with increases in both price and production.
  • PNG’s hosting of the Asia-Pacific Economic Cooperation Leaders’ Meeting in 2018.
  • Legislative changes introduced on 1 January 2017 on taxation of the extractive sector.

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EITI Report Launched

Mathew Vari | Post Courier | March 19, 2018

The PNG Extractive Industries Transparency Initiative (EITI) national secretariat launched its 2016 and 2015 reports last Friday.
Treasury Minister Charles Abel was on hand to launch both reports as the head of the secretariat Lucas Alkan delivered the progress of the country to the global initiative.
In launching its fourth report, Alkan said the Multi Stakeholder Group (MSG) agreed to publish the reports together as both reports will be used by the EITI International Secretariat to assess PNG’s progress in implementation the initiative in the country.
“EITI International started taking this thing up to make sure that companies that are operating in the countries we should know who is the owner, the shareholders, these are the things that EITI international has made a requirement for us to take on board as an implementing country,” Mr Alkan said.
“We are also conducting sub national payments. We have been concentrating at a national level of payments and transfers taking place.
“But we are all aware that a lot of the transactions happen down the line past the national level to provincial local and district resource revenues so we need to put some light into what is happening, accountability, transparency got onboard,” he said.
The PNG EITI national secretariat was established NEC when PNG applied for membership 2014 and the international secretariat accepted the country as a candidate.
“The reports have been covering the revenue streams and reporting entities. Reporting revenue streams like corporate income tax, group tax, mining and petroleum tax all these things are being reported in this reports.
“We are reporting on companies that are in production and exporting these commodities and not exploration activities.
“There is a section on legal framework and fiscal regimes tax arrangements and taxation legislation governing the extractive sector activities in the country management and distribution of revenues, how the money from the resource sector gets into the budget.”
Mr Alkan said the documents are not just reports but need to be translated to actual reforms that matter to the country as far as transparency, accountability and governance is concerned.

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PNGEITI Welcomes Decision On Tax Credit Scheme

Post Courier | February 1, 2018

The Papua New Guinea Extractive Industries Transparency Initiative (PNGEITI) has welcomed the government’s decision to put on hold Tax Credit Scheme (TCS).
Prime Minster Peter O’Neill told business leaders some companies failed to execute TCS properly.
Mr O’Neill said the government decided to put a stop to it, because there is a transparency issue with the process.
Head of PNGEITI National Secretariat Lucas Alkan when concurring with the idea that the TCS is a best public private partnership (PPP), said the opaque nature of the scheme had to be addressed by reviewing the processes involved in awarding tax credit to companies.
Mr Alkan said successive EITI reports have found discrepancies in the reporting of the tax value foregone and it was timely that the government looks into it to take remedial actions.
“We welcome the decision of the Government to put on hold TCS projects as EITI reports affirm the observation that there is lack of transparency and accountability in this scheme.
“The process needs to be more transparent -particularly the guidelines and the criteria involved in the approval process.
The ITC expenditure should be included in the annual national budget books and the Department of National Planning and Monitoring (DNPM), should be able to show this information,” he said.
Mr Alkan said the PNGEITI Report for 2016 fiscal year published recently included the ITC as one of the recommendations for the government to increase transparency and accountability regarding the approval process by DNPM, expended on projects by companies and resulting tax payments offset by the IRC. “We trust the national government will address the opaque nature of this scheme so that original intent of TCS is maintained. “We applaud the Prime Minister for the insight and look forward to a review of the TCS,” he said.

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Report reveals failure to provide K72.9mil oil and gas receipts

The National aka The Loggers Times | January 3, 2018

Bank of PNG has failed to produce receipts for oil and gas development levy and royalty payments totalling K72.9 million, according to a report.
Those receipts were for payments made by ExxonMobil PNG Limited to the government in 2016, said a 2017 report produced by the PNG Extractive Industries Transparency Initiative (PNGEITI). The payments were K62.2 million for development levy and K10.7 million for royalty payments.
At the time the report was published, Bank of PNG had not provided the independent administrator of the report with confirmation of the receipt. The report includes payments done by Oil Search Ltd and ExxonMobil PNG LNG.
Oil Search pays development levy and royalties to the Department of Petroleum and Energy (DPE) by cheque while ExxonMobil pays the levy and royalties to Bank of PNG via electronic transfer and sends remittances advices to DPE, said the report.
ExxonMobil PNG said they have been directed by the Government to this payment method.
The DPE only provided receipts for Oil Search payments of K7.4 million in development levy and K26.3 million in royalty. These payments have been 95 per cent reconciled.
The 2016 report by the PNG EITI is the fourth under the department of Treasury. It was endorsed by Treasurer Charles Abel.
“The 2016 financial year report is the culmination of continued commitment, collaboration and efforts by the Government, extractive industries and civil society organisations to provide a comprehensive picture of the sector, its impact on the economy and our management of the revenues and benefits derived,” Abel said.
EITI is a global standard for the good governance of oil, gas and mineral resources. It seeks to address the key governance issues in the extractive sectors.
PNG became a candidate of the EITI in 2014 and is looking to deal with transparency issues to improve it image for foreign investment.

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EITI releases 2016 Report

Cedric Patjole | Loop PNG | December 23, 2017

The PNG Extractive Industry Transparency Initiative (EITI) has released its 2016 Report.

This is the fourth report by the entity since joining the global EITI standards movement.

In his forward in the report, Treasurer Charles Abel said the 2016 Financial Year Report is the culmination of continued commitment, collaboration and efforts by the Government, extractive industries and civil society organisations to provide a comprehensive picture of the sector, its impact on the economy and our management of the revenues and benefits derived.

He said the 2016 Report is important in that it will form the basis of an external review and assessment for PNG’s EITI membership validation in 2018.

“The EITI process can also help improve current policy settings, the taxation and fiscal regime governing the extractives sector,” he stated.

“It demands Government to adhere to global best practices in the sector by increasing transparency and accountability of extractive revenues. It also demands the highest levels of transparency in the collection and distribution of revenues by the Government.

“I encourage the public to read the contents of the report and use it as a basis for stimulating further discussions on the management of the sector,” said Abel.

“Though PNG remains one of the most challenging countries to invest in geographically, it is amongst the most geologically attractive countries in the world.

“While global commodity prices have remained subdued in the last couple of years, developers of a number of proposed projects in PNG have remained committed and proceeded with several major mines set to come on stream in the near future.

“With promising signs of global commodity prices recovering, both developers, Government and our people stand to gain from the operation of these projects.

“The Government values the EITI process because it is playing a critical role in providing such reports to the public for them to better understand how we are managing the revenues and other benefits derived from the sector.”

Abel reassures investors that PNG is committed to transparency and accountability to achieve better outcomes for our development aspirations.

The PNG EITI aims to promote revenue transparency and accountability in the country’s mining and petroleum sectors.

This report covers the calendar year from 1 January 2016 to 31 December 2016.

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