Papua New Guinea revives profits tax
Papua New Guinea has revived its additional profits tax (APT) to apply to the proposed ExxonMobil Corp.-led Papua New Guinea LNG project.
MELBOURNE, June 5 -- Papua New Guinea has revived its additional profits tax (APT) to apply to the proposed ExxonMobil Corp.-led Papua New Guinea LNG project.
Previously the tax, which was cancelled in 2003, was applied solely to the now-dormant Bougainville copper mine.
Treasury and Finance Minister Patrick Pruaitch said the APT has been reinstated and will be imposed on the pioneering LNG gas project. He said the revenue would help Papua New Guinea benefit from rising commodity and energy prices.
"With many global oil companies enjoying super profits, the government believed it would be untenable if the Papua New Guinea government and people were unable to share in what could potentially be windfall revenues and profits from LNG exports."
Papua New Guinea's fiscal regime applies a 30% corporate tax on every company in the country, but the APT will be an additional 7.5% when the Papua New Guinea LNG project's internal rate of return exceeds 17.5% and another 10% when the rate exceeds 20%.
Estimates of total government tax take from the ExxonMobil-led project are $25-30 billion over its 30-year life.
Pruaitch added: "If oil prices continue to spiral upwards in the manner they have done in the past year, any windfall earnings from LNG will be equitably shared between the project owners and developers, and the Papua New Guinea government, landowners, and the population at large."
The Papua New Guinea LNG project has just entered an 18-month front-end engineering and design stage likely to cost about $400 million.
The minister said the government has allowed the project participants to sell 'wet' gas, which includes liquefied petroleum gas, because it increases the value of the LNG exported through the pricing mechanism, which is based on calorific value.
"Asian buyers are willing to pay premium prices for wet gas, and this has been deemed the best outcome for Papua New Guinea," Pruaitch said.
However he added, "Significant volumes of condensate will be stripped from the gas flows from the various fields in the project and piped down the existing oil pipeline to the Kumul terminal in the Gulf of Papua."