PNG appears to have buckled on Papua LNG project but pressure now on P’nyang terms: analyst
PNG appears to have buckled by largely honouring the existing Papua LNG contract, says Credit Suisse.
PNG Petroleum Minister Kerenga Kua appears to have buckled to industry pressure by largely keeping the existing $US13bn Papua LNG contract in place, note Credit Suisse analysts.
The LNG expansion deal was originally struck in April with former Prime Minister Peter O’Neill but renegotiated after new leader James Marape called for a better economic return for the state.
Papua LNG owners Total, ExxonMobil and Oil Search (OSH) ultimately prevailed in the talks, the broker said. The final deal agreed on Tuesday is a “sombre outcome for the people of PNG, but a victory for the joint venture partners”, Credit Suisse analyst Saul Kavonic said.
Still, it may mean talks on the second part of the expansion, led by Exxon and Oil Search and called P’nyang, results in a tougher government tone.
“A wariness of reopening a signed agreement appears to have loomed large in the government decision, suggesting the yet to be signed P’nyang gas agreement could still be subject to greater risk of harsher terms, and could thus still risk delay to the entire project, as it is also a prerequisite to FEED entry,” Mr Kavonic said.
Local content provisions agreed under the reworked Papua LNG deal may amount to little.
“Any local content, such as PNG government participation in shipping, might well end up being foreign operated for all practical purposes (given limited local capacity) with a notional national involvement to clip the ticket presenting higher cost without realising wider economic spin-off benefits,” Mr Kavonic said.
