PROJECTS
Natural Gas Development: Open Access and On-Shore Uses, Papua New Guinea
The problem
Papua New Guinea had developed its off-shore natural gas fields through contracts allowing global oil and gas companies to develop large self-contained schemes which pipe gas directly to LNG plants for export in tankers. However, this model did little for on-shore industrial development and inhibited the development of smaller gas fields whose size did not justify the cost of a dedicated offshore pipeline.
How we helped
Castalia assisted the Government of PNG with a new ‘domestic supply obligation’ which requires a portion of output over the life of the field to be sold domestically. To maximize value from the domestic supply obligation, we recommended that the domestic gas be priced at the net-back value (that is, the value of LNG export less the cost of shipping and liquefaction) and that gas exporters should be allowed to ‘bank’ domestic supply obligations, so if domestic demand was not adequate in one year, the obligation could be met in a later year. Together these two mechanisms ensure that value received for the gas is never less than the value it would command on the world market, while allowing for the progressive development of on-shore uses of gas. We also developed an open access regime, requiring pipeline owners to agree to connect their pipelines and transport gas for other users, in exchange for a cost reflective transit fee. New pipelines would be developed on open access principles and would be sited to optimize service to all potential users, rather than just to major LNG project promoters.
Impact
The Government issued a Policy White Paper adopting the policies we had recommended for regulating the gas pipeline industry and creating a domestic market for gas.
The client
Government of PNG via contract with Kumul Petroleum Holdings Limited
Our team
Find out more
- News story: Policy on natural gas is good news
How can we help you?
How can we help you?
WASHINGTON, DC
+1 (202) 466-6790
1747 Pennsylvania Avenue NW, Suite 1200
United States of America
SYDNEY
+61 (2) 9231 6862
Suite 19.01, Level 19, 227 Elizabeth Street
Australia
AUCKLAND
+64 (4) 913 2800
Sinclair House, 3 Glenside Crescent
New Zealand
WELLINGTON
+64 (4) 913 2800
Level 2, 88 The Terrace
New Zealand
PARIS
+33 (0)1 85 64 10 22
3B Rue Taylor
France
BOGOTÁ
+57 (1) 508 5794
Calle 81 #11-08, Piso 5, Oficina 5-121
Colombia
Thinking for a better world.
WASHINGTON, DC
+1 (202) 466-6790
1747 Pennsylvania Avenue NW, Suite 1200
United States of America
SYDNEY
+61 (2) 9231 6862
Suite 19.01, Level 19, 227 Elizabeth Street
Australia
AUCKLAND
+64 (4) 913 2800
74D France Street, Newton South
New Zealand
WELLINGTON
+64 (4) 913 2800
Level 2, 88 The Terrace
New Zealand
PARIS
+33 (1) 73 44 26 97
6 Rue Duret
France
BOGOTÁ
+57 (1) 508 5794
Calle 81 #11-08, Piso 5, Oficina 5-127
Colombia
Thinking for a better world.