THE PAPUA NEW GUINEA STANDARD PETROLEUM AGREEMENT: ITS STRENGTHS AND WEAKNESSES

Abstract

Until the discovery of the Iagifu/Hedinia/Agogo (now called Kutubu) Fields, Papua New Guinea (PNG) petroleum laws followed, in both legislation and administration, the Australian model brought to PNG by the former pre-independence administrators. In particular, exploration and production rights derived from licences issued under the national petroleum legislation.

This practice was distinctly different from the State practice of PNG's near neighbours to the north, particularly Indonesia and Malaysia. In those countries rights to explore for and produce petroleum were acquired by entry into a production sharing contract with the State which to a considerable extent was a self-contained legal code.

In addition, PNG has developed a unique contractual model which has been grafted on to the existing licensing system. This new model, embodied in a Standard Petroleum Agreement (SPA), incorporates elements of the negotiated petroleum agreements common in countries with a less developed legal system.

The scope of this paper is to assess the strengths and weaknesses of the SPA, both internally and against the framework of the PNG legislation, particularly the Petroleum Act, as well as against the background of similar petroleum agreements offered to oil companies by other countries in the region.