Announcement of a World Bank Loan to Help Papua New Guinea Improve Petroleum Sector Management on December 10, 1993

12/10/1993 16:29 P.01 World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.SA * Tephone: (202) 477-1234 News Release No. 94/37EAP Contact: Erin Burns (202)458-2210 External Affairs EAPVP PNG WW Improve Petroleum Sector Management Washington, D.C., December 10, 193 -A World Bank loan of S11 million will help improve management of Papua New Guinea's petroleum sector and explore options for exporting natural gas. Petroleum accounts for one-third of exports and generates about 13 percent of total Government revenue, making it critical in the Government's efforts to finance national development. Oil production in PNG in 1993 is close to 140,000 barrels per day. Unless additional investments are made, this amount is expected to drop off quickly. The World Bank loan will finance training and technical assistance to help improve control and monitoring of the sector. The investment incentive framework will also be reviewed, with a view to improving the investment climate. The loan is aimed at increasing investment in the petroleum sector and adding to govenment revenue. Development Needs Are Great W hW & 65.6 7 71.8 According to Mr. Peter 53 s4.7 4s Scherer, World Bank Division Chief in 34 33A the PNG Country Department, the gOvelment of PNG is wrsuing a I - "development program th is widely Ppus New EA Asia (Av.) endorsed by the dono community. Gui.. The 1993 investment budget more a &..W. ".... f lo. a kW.. 1% E a.. to Saf. than doubled allocations to Ow I'AM" '""a " WM" infrastructure and education. According to Mr. Scherer, "the need for a well-aimed and appropriately-fimded development strategy in the country is great. While basic food and shelter requirements are generally met, PNGs social indicators lag behind those of other East Asian or middle income countries." PNG's economy is narrowly based on extractive industries, including tree crops, timber, minerals and oil. "The Governments plan in this case," Mr. Scherer says, "is to use revenue from extractive industries to promote growth in the other sectors of the economy and to widen the provision of basic services." 12/10/1993 16:29 P.02 4 Other measures to increase investment in the petroleum sector include a more systematic gathering and analyzing of exploration and development data, and then marketing of this information to potential international investors. The Petroleum Exploration md Development Technical Assistance Project will also improve standards for safe and efficient storage, handling and transportation of petroleum products. Environmental standards for petroleum exploration and development will also be monitored. Project objectives will be met by hiring relevant experts for fixed terms to provide advice and technical assistance to the Department of Mining and Petroleum and carry out a number of feasibility studies on the petroleum and LNG sectors. The project will also finance computer hardware and software to support the Department of Mining and Petroleum in monitoring and analyzing petroleum exploration and development activities. The total cost of the project is S12.15 million. The Government of PNG is providing the equivalent of S1. 15 million for the project. The loan is extended for 20 years, including five years of grace, at the Banks standard variable interest rate, currently 7.43 percent. Noe: Moneyflgws ar in US. dolar equivalwt 2/. TOTAL P.02