exploration tax review

Chevron head says PNG needs exploration tax review

The fiscal regime for oil exploration in PNG needs to be modified to reflect the high risks and low reserve margins in the fields in the country, says the President of Chevron Overseas Petroleum Inc (COPI) Richard Matzke.

Matzke said this would attract new companies and would also provide an incentive for existing companies to carry out more exploration.

He was speaking to the Post-Courier after a short visit last month, in which he met with Chevron employees and other joint venture partners and also met with Prime Minister Sir Mekere Morauta.

As COPI president, Mr Matzke is

responsible for Chevron’s petroleum

operations globally. He has been visiting PNG once a year for the last 10 years.

Mr Matzke said Chevron had been exploring for oil in PNG for more than 10 years and the prospects they had left were

“relatively small, relatively expensive and very high risk”.

“We don’t have a lot of technical opportunities left. We’ve been exploring for 10 years and the prospects we have left are relatively small, relatively expensive and very high risk.

“We would suggest that maybe the fiscal regime on new exploration be modified to recognise the much higher risk and the small reserve targets. We think that will bring more exploration money to PNG.

“We know we would.We think it will bring a lot of other money too,” Matzke said.

However, he said changing the fiscal regime, especially for new exploration was “not untypical when you get into state of maturity in oil field

developments.

“Things have to change a little bit. So we would suggest that these higher fiscal items be reviewed by the Government to come up with the

appropriate set of terms and conditions that would attract money on a competitive basis,” Matzke said. He is not alone in expressing concern about the low level of exploration, not only in the petroleum sector but also in the mining sector.

The Chamber of Mines and Petroleum and various industry players in both sectors have expressed concern over the last couple of years at the adhoc taxes that were introduced by various governments, and how that was

stifling exploration.

The chamber’s concerns have been submitted to the Government tax review commitee headed by Sir Nagora Bogan.

Addressing a corporate function with their partners and clients, Matzke spoke about the partnership between the joint venture partners in the Kutubu and Gobe projects, which Chevron operated and how that had worked.

He said the oilfields in PNG did not have enough reserves for one licence holder to individually have the massive infrastructure that took to develop and extract oil efficiently, so many licence holders needed to get together and move in an aligned synchronized way forward.

Matzke told the guests that the last decade had been an exciting one for Chevron in PNG.

“I would hope that over the course of the past decade and a half or two decades that Chevron has left a footprint in the ground here,” he said.

Matzke said one aspect of their operation which they were proud of was that of the partnership.

Matzke said one of the biggest challenges for the developers was making the oilfields last a little bit longer than they might otherwise, and that was “going to take a degree of effort in the partnership arena, co-operation and understanding”. (Post Courier) ■