Papua LNG’s terms are locked in. The investment isn’t.

by PAUL L. KEBAIJA

Of the four bills Parliament passed on 22 October, the Resource Contracts Fiscal Stabilisation (Amendment) Bill 2026 will outlast every MP who voted for it. Fiscal stabilisation is a promise that the tax terms a project starts with are the terms it keeps, whatever later Parliaments decide.

The law sets the term, and for gas it sets no fixed limit. The Resource Contracts Fiscal Stabilisation Act, as amended in 2001, lets the State guarantee a gas project's fiscal terms for as long as it takes to produce the foundation volume of gas defined in the gas agreement. For other resource projects the cap is 20 years or the financing period, whichever is shorter. For Papua LNG, the guarantee lasts as long as the gas agreement says the foundation gas takes to produce, and the gas agreement is not public.

Precedent shows what such bills do. When Parliament amended the same Act for the P'nyang project in 2022, the amendment gave the P'nyang fiscal stability agreement the force of law "notwithstanding anything in any other law". If last week's bill follows that template for Papua LNG, and its text is not yet public, then a commercial agreement negotiated in private now ranks above ordinary legislation. A future Parliament that wanted to change the terms would first have to repeal a law and then face the developers' lawyers.

Investors want stability for good reasons. A project of this size borrows billions against forecast cash flows, and lenders do not lend against tax regimes that might change next year. Stabilisation clauses are common in large resource projects worldwide. The question is not whether to stabilise, but what is stabilised, for how long, and on what evidence.

PNG has been through this cycle before. In April 2019, the O'Neill government signed the original gas agreement, and that October Parliament passed ten amendment bills to enshrine it. The Marape government sought to renegotiate, then signed a fiscal stability agreement in 2021 confirming the 2019 terms, and has now legislated a new set, including the price-linked incentive and the cross-project deduction. That is three sets of terms in seven years for a project that has not yet produced any gas. Each time, the State has locked in its side before the developers committed theirs.

That sequencing is the core problem. Parliament has legislated the State's concessions ahead of a final investment decision due by 15 December. If FID slips again, as it has repeatedly since 2019, the laws stay on the books and the State's bargaining chips are already spent. Nothing public suggests the concessions lapse if FID is not taken by a set date. If such a sunset clause exists, ministers should say so. If it does not, they should explain why not.

Stabilisation also freezes the State's mistakes. If the cross-project deduction proves costlier than expected, or the US$81 benchmark turns out to be badly placed, a future government cannot fix it by ordinary legislation. Whatever is frozen now stays frozen until the foundation gas is gone.

The public is owed four things: the bill text and its explanatory statement; the stabilisation period stated in years; a clear answer on whether the concessions lapse without FID; and the fiscal stability agreement itself, tabled in Parliament. A promise that binds Parliaments not yet elected should at least be readable by the one that made it.