At the end of 2003 Papua New Guinea had total oil reserves totalling 400 million barrels and had produced 14,983 billion barrels of oil. According to the 2008 BP Statistical Energy Survey, Papua New Guinea had 2007 proved natural gas reserves of 0.43 trillion cubic metres, 0.24% of the world total.
Due to concerns about the lack of exploration activity in Papua New Guinea, particularly in the drilling of exploration wells, and the projected steep decline in oil production from the existing Kutubu, Gobe and Moran oil fields over the period 2003-2010, the Government has introduced special fiscal terms that are to provide an incentive to the industry to explore. Those special terms have been styled as "incentive rate petroleum operations".
Incentive rate petroleum operations will be subject to a revised income tax of just 30% of taxable income. This is a significant decrease from normal petroleum operations, the income of which is currently assessed at 50% of taxable income for petroleum projects established prior to January 1st 2001 and 45% for projects thereafter.
A new 30% rate of taxation has become available for petroleum operations pursuant to a Petroleum Development Licences granted on or before 31st December 2017. To qualify for this incentive rate, companies needed to be granted a petroleum prospecting licence within the designated period of 1st January 2003 to 31st December 2007.
