Project

Subnational Payments in PNG’s Extractive Sector

Country:
Papua New Guinea
Partners:
Papua New Guinea Extractive Industries Transparency Initiative; The Pacific Leadership and Governance Precinct
Funders:
Australian Department of Foreign Affairs and Trade, Newcrest Mining

As Papua New Guinea (PNG) works to transition its natural resources into inclusive and sustainable forms of development, the taxes, fees and levies collected from extractive projects provide much-needed revenue to the national government. These ‘resource rents’ help the national government to fund basic services to its citizenry—many of whom live in remote areas with limited access to health, education, electricity and sanitation services. Mining, oil and gas projects also generate important financial flows at the subnational level, where extraction takes place. These subnational payments and transfers fund a diverse range of public and private spending.

Through PNG’s participation in the Extractive Industries Transparency Initiative (EITI), a global standard that promotes transparency and accountability in the oil, gas and mining sectors, much progress has been made on the reporting of extractive revenues to the national level. Yet, payment data at the subnational level is either non-existent, too aggregated to be meaningful, inconsistent across projects, or difficult to obtain. More effective reporting of subnational payments and transfers through PNGEITI can provide local stakeholders access to relevant and timely information on the extractive revenue flows that affect them most. Strengthening PNGEITI subnational reporting can also drive transparency and accountability in PNG’s extractive provinces, contribute to decentralisation and subnational governance efforts, and potentially improve social license to operate for extractive companies.

This scoping study, part of Square Circle’s ongoing multi-year collaboration with PNGEITI, used a combination of stakeholder interviews, data requests and case studies to:

  • Identify and map the subnational payments and transfers in PNG’s extractives sector,
  • Document stakeholder views on enhanced subnational reporting through PNGEITI and
  • Develop a reporting framework and roadmap for PNGEITI subnational reporting.

 

Case studies from Newcrest Mining Limited’s Lihir gold mine in New Ireland Province, OK Tedi Mining Limited in Western Province, Geopacific’s Woodlark Gold project in Milne Bay, and the PNG LNG Project highlight the range of subnational payments in PNG’s extractive provinces.

This project supports the wider goal of improving sub-national governance and institutional extractive payments dashboard to allow payment flows to be better understood by stakeholders. The study also put forward a framework for subnational reporting including six key recommendations:

  • Develop, resource and implement a plan for PNGEITI subnational reporting in extractive provinces;
  • Establish PNGEITI subnational multi-stakeholder groups (MSGs) with links to the PNGEITI MSG and secretariat;
  • Include subnational government entitites and non-government entities, including landowner businesses and associations
  • Set quantitative and qualitative materiality thresholds;
  • Standardise payment categories and allow for reporting of expenditure, impacts, and MOA commitments; and
  • Pilot subnational reporting with an adaptive rollout in three provinces.

 

The results of the study were launched at a stakeholder workshop and PNGEITI subnational reporting is now being implemented across PNG’s extractive provinces.

Subnational Payments in PNG’s Extractive Sector Report

An Interactive Dashboard for understanding Subnational Payments in the PNG Extractives Sector

See Report

It is important to ensure that those financial benefits are managed properly, sustainably and of course everyone needs to know where the benefits go to and how they are spent. And particularly in the communities so that they are party to decision making about where the money goes.

Stakeholder comment

It’s a good initiative that you are bringing it down to the subnational level and I think for the Nimimar local-level government... it’s good you have partnership with the Nimimar local-level government.

Stakeholder comment

These are public funds that we are dealing with. Regardless of the amount, people want to know what is happening with that money. If we can report through PNGEITI then it gives comfort to everyone so that people know that the funds are being managed like they expect.

Stakeholder comment

I believe PNGEITI is one of the things that we are looking forward to –especially us the landowners –because when it comes to production there will be the royalties paid to us and we need transparency, especially handling with the royalties to make sure that the maximum benefits go to the landowners.

Woodlark landowner

This PNGEITI reporting has been at the high-level only–now I see you are bringing it down to the village and family level and I’m very happy because this kind of report doesn’t usually come to the grass roots level.

Stakeholder comment `{`Translation`}`

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