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.