Papua LNG to advance despite PNG halting talks

Image courtesy of Total

Papua LNG project is expected to advance with certain modifications following the halt in negotiations between the JV partners and the PNG government over P’nyang gas field agreement. 

Negotiations on the development of the P’nyang gas field in Papua New Guinea have broken down following “ExxonMobil’s unwillingness to agree reasonable terms.”

Commenting on the negotiations, Papua New Guinea’s prime minister, James Marape, said that the country extended the negotiation deadline to reach a mutually beneficial deal a number of times.

“At the same time the SNT has indicated a willingness to make significant concessions if Exxon Mobil was prepared to do the same, however, Exxon Mobil’s final offer was delivered yesterday, only one day before the final deadline and this contained no such concessions,” Marape said.

He noted that after months of engagement, ExxonMobil’s offer had barely changed from its opening offer presented last November and is not substantially different from the Papua LNG gas agreement.

Marape added, “the State take proposed by project partners was significantly less than our APAC neighbours such as Malaysia, where Exxon Mobil has a huge operation, or indeed by our immediate neighbours Indonesia and Brunei.”

Commenting on PNG’s decision to halt talks on the P’nyang gas agreement, Oil Search managing director Peter Botten noted that the government has the right to set fiscal terms for resource developments in PNG.

However, Botten said that the resource size, cost of development and the challenges of operating in Papua New Guinea are very different to other countries, making broad comparisons with State take under other fiscal regimes in our region misleading.

Under the terms proposed by the state, the joint venture partners were unable to obtain a return on their investment that made the project investable and bankable.

“While Oil Search will continue a dialogue with the state on the P’nyang field and will seek to achieve the appropriate balance of risk and reward for all stakeholders in any future development, it is our intention to now focus on the development of the Papua LNG project, under the terms agreed in April 2019 and endorsed by the present Government in September 2019, as well as on the exploration and development of our Alaskan assets,” Botten said.

Oil Search will seek to advance the Papua LNG project in a timely way, recognising that several engineering and commercial modifications will need to be made now that the P’nyang development is delayed.

Joint venture meetings are planned in the short term to discuss the forward programme and we will update the market following these discussions.

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