Integrated $20bn LNG expansion in Papua New Guinea increasingly ‘looks in doubt’
Prime Minister James Marape says proceeding with the Papua LNG part of the expansion should not be reliant on P’nyang.
The future of an integrated $20bn LNG expansion in Papua New Guinea increasingly looks in doubt after Prime Minister James Marape said the nation was seeking legal advice on whether the Papua and P’nyang projects could be developed separately.
The plan to double LNG exports was based on deals to develop two new gas fields which would produce three equal-sized LNG trains at the existing PNG LNG plant.
Total, ExxonMobil and Oil Search agreed the first two train part of the enlarged facility through the Papua LNG contract in September 2019 but the PNG government abandoned talks over the P’nyang component which was to provide the third LNG train but now faces a two-year delay.
Mr Marape told PNG’s parliament proceeding with the Papua LNG part of the expansion should not be reliant on P’nyang.
“This project has been delayed due to two primary reasons. Firstly because of the impact of the corona pandemic and secondly other joint venture partners particularly ExxonMobil and Oil Search’s insistence for P’nyang gas to be part of the project.
Clearly Papua LNG project development is not conditional on P’nyang gas resources. And yet the country has been unfairly held to ransom, so to speak, by these two companies,” Mr Marape told parliament as part of an update on its key projects. “Our government will not tolerate such behaviour.”
PNG’s government was awaiting a legal opinion on the nation’s options.
“We are seeking legal advice and when this is done we will be sitting down with Total to get this project started after the sensitivity of the COVID-19 pandemic has ended. I want to assure this honourable house that this Government is fully committed to ensuring that this project is developed without further delay.”
Exxon said discussions with the PNG Government were ongoing.
“We are hopeful that we can continue to work towards an outcome that benefits all stakeholders,” an Exxon spokesman said.
Oil Search declined to comment while Total did not respond for a request for comment.
Oil Search noted at its half-year results in August that its senior partner ExxonMobil had now re-engaged with the government over striking a deal for P’nyang.
Mr Marape said he has written to Exxon chief executive and chairman Darren Woods in June advocating for P’nyang after negotiations had broken down in January due to the US major’s desire for similar fiscal terms to the PNG LNG project which it operates.
“The chairman has responded positively indicating that they fully understand the position of the government and that they will respond after their consultations with other joint venture partners have concluded,” Mr Marape said on Wednesday. “I am hopeful that both parties can find a mutually acceptable pathway when we re-engage as a no-deal will have far reaching consequences for both parties.”
After the breakdown in P’nyang talks, former Oil Search boss Peter Botten hatched a plan for a smaller two-train Papua LNG project rather than the original three-train concept that requires P’nyang to be approved.
However, his successor Keiran Wulff weeks later backtracked on Mr Botten’s Plan B saying it was again focused on the bigger expansion plan, noting both of its larger joint venture partners Total and ExxonMobil had indicated their support to reboot talks with the government.
Total in February also said it was prepared to wait for up to a year for a compromise to be struck on the giant gas project, dampening the chances of a slimmed-down development being advanced after negotiations stalled.
Oil Search said on August 25 it now sees the expansion will be delayed by two years, reflecting stalled talks with the PNG government and its expectation that new supplies will not being required from buyers until later this decade.
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