Umbrella Benefits Sharing Agreement

The PNG LNG project is the largest private investment in PNG, with benefits that will have a positive and lasting impact on the entire country. The national government shall make available to all Contracting Parties a package of benefits to be distributed in accordance with Article 6.1 (Article 6). The trust companies will manage the benefits of the agreement for project landowners, local governments and provincial governments. Trust companies carry out an independent audit every six months, regularly change their directors, draw up half-yearly and annual accounts, publish their investment and dividend policy and present full annual accounts with annual income (Article 9). The national government, in consultation with provincial and local governments, will develop development programmes and projects and will be assisted in the development of business plans and budgets as well as operating and maintenance costs (Article 14). All communication between the parties to the agreement is in writing (art. 21). The treaty is governed by the laws of Papua New Guinea and disputes arising therefrom fall under the exclusive jurisdiction of the State courts (art. 22).

The PNG Department of Petroleum (DoP) transfers these funds to the Mineral Resources Development Company (MRDC), which is responsible for distributing benefits to the Incorporated Land Groups (ILG) license area identified in the SMLI that relate to provincial and local governments. Benefits for landowners include different types of payments, including royalties, equity, development royalties, infrastructure development grants, and business development grants. That is why it is a priority for us to actively assist the Government of PNG in fulfilling its obligations to distribute receipts in cash and in kind in a timely manner. It has become increasingly important since the start of the sale of revenues from the PNG LNG project in 2015. The option to acquire shares in Kumul Petroleum (Kroton No 2) Holdings Limited is one of the benefits agreed by the PNG government and defined in 2009 in the Umbrella Benefits (UBSA) sharing agreement for landowners and provincial governments along the footprint of the PNGLNG project. This framework agreement forms the basis for benefit-sharing of the LNG gas agreement signed between Papua New Guinea and LNG project companies. The parties to this agreement are the national government, four provincial governments, ten local governments and the landowner project area (preamble). The agreement was developed following a consultation process that culminated in a forum. The agreement forms the basis for development forums based on subsequent licenses that result in the signing of license-specific benefit compensation agreements. Consultation meetings were held over a period of 3 to 4 weeks prior to the implementation of the agreement (preamble, Article 1). The date of the benefits resulting from the equity is separated from the date of actual development and production of gas, but if the production and sale of gas is interrupted by the LNG project, all benefits of the agreement are also interrupted until the project resumes production and sale (Article 1). Article 4.2 lists the licences to which this Agreement applies.

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