Central Bank : Drop in LNG prices in Japan may affect government revenue

THE Bank of Papua New Guinea has warned that any decline in LNG prices in Japan could affect the current pricing of PNG’s LNG exports.

This would, in turn, consequently affect the government’s LNG revenue forecast.

In a recent quarterly economic bulletin, BPNG Governor Loi Bakani said natural gas prices in the US are expected to remain elevated in 2014 in response to stronger demand from energy intensive industries that are moving to the US.

This, he said, will have an impact on the demand for natural gas from Europe, while Japan’s LNG prices could moderate.

The bank in the report said key global commodity prices remained stable in the first quarter of this year.

Oil prices also remained stable despite tensions between Russia and Ukraine, and there are imminent risks arising from the conflict in Iraq.

The World Bank is projecting oil prices to average US$103/bbl in 2014, assuming there are no macroeconomic shocks.

Bakani has also once again called on the government to fast track with the establishment of a sovereign wealth fund (SWF) for PNG.

He was concerned that the issue surrounding the SWF setup has not been finalised yet but will go before Parliament for approval.

He urged the government to identify a solution that is in the best interest of Papua New Guinea and its citizens, and put to rest the uncertainty surrounding the SWF establishment.

Sovereign wealth funds have existed for more than a century, but since 2000, the number of sovereign wealth funds has increased dramatically. The first SWFs were created by Texas, USA.