Government considers tax breaks to rescue K62 billion Papua LNG deal

The National Government is considering a multi-billion Kina assistance package to bridge a financing gap that threatens to further delay the massive Papua LNG project.

Petroleum Minister Jimmy Maladina told Parliament yesterday that while a Final Investment Decision [FID] was originally expected in the first quarter of 2026, a massive project cost blowout and global financing hurdles have pushed the timeline back.

Responding to questions from Opposition Leader James Nomane, regarding the six-year delay of the project, Minister Maladina revealed that the estimated cost of Papua LNG has surged from an initial US$11.9 billion to US$14.5 billion [about K62 billion].

Despite efforts by lead operator TotalEnergies to reduce costs by restricted tendering to Asian contractors, a US$2.5 billion [approx. K10.2 billion] gap remains.

"The project proponents have come back to the government and asked for assistance in some tax incentives to try to claw back that price," Maladina said. "The government has decided we will give them some assistance to make sure this project happens… this year."

The Minister said specific nature of the tax breaks or incentives is currently pending Cabinet [National Executive Council] approval.

The debate took an urgent turn when Deputy Opposition Leader Keith Iduhu raised concerns over the escalating conflict in the Middle East involving Iran, Israel, and the United States. Iduhu questioned how the government plans to protect PNG from astronomically high oil prices, which have surged past US$100 per barrel in recent weeks.

Minister Maladina admitted the situation is out of our control but confirmed he has requested urgent reports from the country’s three major importers in Puma, ExxonMobil, and TotalEnergies.

"I have asked them to give me a report on the next plan… to let me know how much they can bring into stockpile in the country for the next two to three months," the Minister said.

He said National Petroleum Authority is working to ensure PNG does not face a fuel shortage due to the disruption of global shipping routes like the Strait of Hormuz.

Meanwhile, Nomane also pressed for an update on Business Development Grants previously allocated to the Gulf and Central provincial governments.

Minister Maladina said he currently has no visibility on those funds, as they were paid directly to the respective provincial administrations. He committed to seeking information from the concerned Governors and reporting back to Parliament during the week.

The Minister, meantime, assured the House that despite the delays, the project financiers, consisting of export credit agencies from Japan, Korea, China, and the US, have in principle secured the necessary finance.