INSIGHT

Tok save - PNG regulatory update: P'nyang Gas Agreement; Whistleblower Bill; Air Niugini/Philippine Airlines codeshare and other developments

By David Hill, Sarah Kuman, Richard Kriedemann
Oil & Gas Papua New Guinea

In brief 4 min read

No P'nyang Gas Agreement with ExxonMobil; first of its kind Whistleblower Bill moves ahead; codeshare denied for Air Niugini/Philippine Airlines; and the Proposed Organic Law on the Independent Commission Against Corruption 2019 (ICAC Bill).

Extractive industries

P'nyang gas agreement

Prime Minister James Marape announced on 31 January 2020 that the PNG Government would not be signing the P'nyang Gas Agreement with ExxonMobil.

Both parties are still yet to reach a consensus on the terms of the gas agreement and negotiations are still ongoing.

Appointment of new Secretary for Department of Petroleum and Energy

On 13 February 2020, the National Executive Council appointed David Manau as the new Secretary for the Department of Petroleum and Energy (DPE), replacing Lohial Nuau who had been acting in the position for 18 months.

Mr Manau is a career employee of the DPE, having worked with the department for over 20 years in various capacities. Following his appointment, Mr Manau indicated his key priorities for the DPE would be on income generation, settling outstanding landowner issues and ensuring monitoring and compliance of the oil and gas reviews currently being undertaken by the PNG Government.

Oil and Gas (Amendment) Act 2019

The Oil and Gas (Amendment) Act 2019 was certified on 13 February 2029. The Act amends subsection 6 of section 160 of the Oil and Gas Act 1998 which now provides that all development levies that both provincial and local level governments are entitled to, must be distributed from a trust account in accordance with a provincial law relating to their appropriation.

Anticorruption initiatives and regulation

Whistleblower Act 2020

On 18 February 2020, the PNG Government passed a Bill for an Act entitled the Whistleblower Bill 2020 (Whistleblower Bill). The Whistleblower Bill is pending certification by the Speaker of Parliament and, once certified, it will commence operation in accordance with a notice published in the National Gazette.

The Whistleblower Bill is the first of its kind in PNG. Once it commences operation it will provide an avenue for employees to report any improprieties within their place of work, including criminal offences, failure to comply with legal obligations, miscarriage of justice and unfair discrimination. The Act will also provide protection for employees to report such activities without fear of reprisals from their employers or management. As an additional protection to employees, provisions of employee-employer agreements that are inconsistent with the Act will also be deemed void to the extent of their inconsistency.

Proposed Organic Law on the Independent Commission Against Corruption 2019

Another anticorruption initiative that was also presented in the February parliamentary sitting was the Proposed Organic Law on the Independent Commission Against Corruption 2019 (ICAC Bill). The ICAC Bill was tabled in Parliament and referred to the Permanent Parliamentary Committee on Constitutional Laws to conduct consultation. Following the completion of the Committee's consultation, a report will be furnished back to the Parliament which will be debated on whether to amend the ICAC Bill or proceed to the next stage of passing the Bill.

Competition and consumer law

The PNG competition and consumer law regulator, the Independent Consumer and Competition Commission (ICCC), recently released two determinations: the first was the codeshare determination between Air Niugini and Philippine Airlines, and the second was the Clearance determination for the Water PNG Limited & Eda Ranu Ltd merger.

Codeshare determination – Air Niugini/Philippine Airlines

On 10 January 2020, the ICCC denied authorisation for Air Niugini to enter into a codeshare arrangement with Philippines Airlines for the Port Moresby-Manila-Port Moresby route.

Authorisation is a process in which parties can seek approval from the ICCC to enter into or give effect to anti-competitive agreements if the public benefits outweighs the anti-competitive effects.

The ICCC denied authorisation for the codeshare arrangement on the premise it would be detrimental to consumers given that:

  • cost of airfares had reduced substantially on this route following Philippine Airlines' entry; and
  • there was an increase in passenger and cargo volumes for both airlines, indicating a high demand for consumers to use the route.
Clearance determination – Eda Ranu & Water PNG

On 22 January 2020, the ICCC granted clearance to Water PNG to undertake a merger with Eda Ranu.

Both water entities are state owned and are monopolies in their geographical markets by virtue of their respective legislations (Eda Ranu only operates in Port Moresby, while Water PNG operates in all other provinces).

Some key points to note about why the ICCC granted clearance to the parties:

  • Current market structure for these types of entities was not economical for having more than one water supplier. There were high sunk costs and capital costs in order to maintain the infrastructures and provide the services.
  • There already existed regulatory oversight on both entities through the regulatory contracts they had with the ICCC. As such, even though the merger would create a monopoly water entity in PNG, it was highly unlikely for the parties to raise prices to the detriment of consumers because the rates were set by the ICCC.

News and other developments

The Special Economic Zone Authority Act 2019 (SEZ Act) was recently certified by Parliament on 13 February 2019 but is pending commencement through a notice published in the National Gazette. When the SEZ Act comes into operation it will repeal PNG's Free Trade Zones Act 2000 and the Industrial Centres Development Corporation Act 1990.

The SEZ Act will provide for the establishment of a Special Economic Zones Authority (the Authority) which will have broad powers to establish special economic zones in PNG. These special economic zones will be exempted from the imposition of all taxes, customs, duties, tariffs and levies, including further incentives to PNG and foreign investors that will be provided by the Authority.