News

Oil and gas in Australia, elections in Kyrgyzstan, political instability in PNG and Sudanese oil disputes covered by new Maplecroft reports and analysis

07/12/2011

Australia

Maplecroft's in-depth Country Risk Report on Australia offers high-level analysis of the key risks for oil and gas companies operating in the country, as well as an overview of the strategic energy relationship with Timor l‘Este.

Dependent on Australian Greens support for its majority, the Labor government is in the process of enacting a new series of taxes which will increase the financial burden on companies operating in the Australian extractive sector. The carbon tax has been passed and will require Australia’s 500 largest polluters to pay A$23 per tonne of CO2 produced until a transition to a carbon market system in 2015. The Mineral Rent Resources Tax (MRRT) and an amendment to the Petroleum Rent Resources Tax (PRRT) are currently with parliament and are expected to be passed by early 2012. These acts will impose taxes of up to 30% on mining and 40% on onshore and offshore oil and gas profits.

The cost to firms of the new taxes will be alleviated by subsidies and preferential rates for the carbon tax and the ability to credit state royalties against MRRT and PRRT liabilities. However, the possibility of the taxes being extended in future, as the IMF and Australian Greens have recommended, cannot be ruled out. In addition, the opposition’s pledge to repeal the carbon tax if it is elected may mean that regulatory and financial uncertainty will continue for firms wishing to invest in Australia. 

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Kyrgyzstan

The second instalment of the Election Monitor Kyrgyzstan offers analysis, forecasts and results of the election and assessments of the implications to industry sectors and investors.

Almazbek Atambaev, leader of Kyrgyzstan’s Social Democratic Party, will assume the presidency on 1 January 2012 following a comfortable first round victory in Presidential elections. While Atambaev’s political rivals have rejected the election results, fears of post-election violence have not materialised. With 60% of eligible voters participating in the election, Atambaev garnered 62.8% of all votes. The former prime minister’s chief rival, Kamchybek Tashiev, head of the nationalists Ata-Jurt faction was a distant second with 14.3% of the vote.

Few supporters have heeded the candidate’s calls to actively protest the election outcome and the short term risk of political violence appears to be low. The danger of a return to sectarian violence remains, however, given the deep seated cultural and economic divisions apparent in the country. Atambayev has stated he plans to enhance the rule of law and significantly increase the legal penalty for instigating sectarian tension, and has a strong mandate to implement policy. However, ethnic and cultural divisions will require persistence to overcome.

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Papua New Guinea

Maplecroft's in-depth Country Risk Report on Papua New Guinea offers high-level analysis and illustrative subnational maps of the governance framework, the regulatory and business environment, conflict and security, human rights, and the environment, as well as an economic overview.

Political instability caused by an unconventional change in executive power creates uncertainty for investors. The replacement of Michael Somare by Peter O’Neill as prime minister in August 2011 represents a sea change in PNG’s politics. The customary system of land tenure also creates significant risks for investors. The customary land law system, which applies to around 97% of PNG, creates a potentially complex structure for business to negotiate; which may increase operational costs and / or expose investors to possible complicity risks.

Criminal, ethnic-based and political violence are a major risk for businesses operating in PNG. The presence of foreign workers and a lack of employment opportunities for local people have driven violence in the past, creating security risks for investors and employees. In addition, tribal and ethnic conflicts are common (especially in the highland provinces).

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Sudan

Maplecroft's Country Risk Briefing on Sudan offers detailed analysis and maps of the governance framework, the regulatory and business environment, conflict and security, human rights, the environment and climate change, plus an economic overview.

Despite a clear need to resolve a range of bilateral issues – including border demarcation and citizenship – failed negotiations and recriminations between Sudan and South Sudan continue. The most pressing issue remains the failure to reach an agreement on transport fees paid for South Sudanese oil being exported through Sudanese infrastructure.

An alliance – called the “Sudanese Revolutionary Front” – between major rebel groups in Darfur and the southern provinces (such as Blue Nile and South Kordofan) of Sudan suggests the potential for greater co-ordination of efforts against the Khartoum government nationally. The pact is also indicative of the multiple threats of violence present in Sudan.

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