PNG government gives green light to Papua LNG project expansion plan approved by predecessor
PNG will honour a near-$20bn LNG expansion deal signed with energy majors including Oil Search.
The Papua New Guinea government will honour a $13 billion LNG expansion deal signed with energy majors including Oil Search, with few substantive changes made to the accord originally sealed with deposed Prime Minister Peter O’Neill.
“The government has now cleared Total to proceed full steam ahead with the implementation of the Papua gas project,” Petroleum Minister Kerenga Kua said in a statement on Tuesday.
Oil Search and its partners, France’s Total and US major ExxonMobil, had insisted the original deal signed in April with the previous government should hold despite concerns raised by new Prime Minister James Marape over whether it would provide sufficient returns for the Pacific nation.
Attention will now quickly shift to the fate of forthcoming talks on the P’nyang section of the LNG expansion involving Exxon, Oil Search and Santos, which could face more onerous terms given the tougher rhetoric under the Marape government.
“We are pleased that the PNG Cabinet has completed its review of the Papua LNG Gas Agreement and has validated the agreement as executed on 9 April, 2019,” Oil Search managing director Peter Botten said on Tuesday.
“The Papua LNG Project will help deliver billions of kina in value to the PNG economy, support local businesses and provide greater employment opportunities for thousands of Papua New Guineans.”
Total made some concessions as part of government negotiations including a national content plan for the gas export project and third-party access to petroleum pipelines. The state will also be able to buy a stake in the pipelines after repaying loans and costs on the development, along with the potential purchase of LNG carriers between the company and the nation’s Kumul Petroleum arm.
Still, Mr Kua said the negotiations had underlined the need for a new licensing system based on sharing production revenues to cover both the petroleum and mining industries.
“The National Executive Council has now instructed the ministers for mining and petroleum to rewrite the laws forthwith to move into a system based on production arrangements,” the statement said. “It is envisaged that a production sharing agreement will relieve the state of expensive loans and create early free cashflows in all future mining and petroleum projects.”
The Papua LNG accord is the first plank of a major expansion which proposes to double gas exports from the Pacific nation by 2024 through expanding the existing ExxonMobil-run PNG LNG plant where Oil Search holds a 29 per cent stake.
Two LNG trains with capacity of 5.4 million tonnes will be supplied through Papua LNG with a further 2.7 million tonnes train to come from the P’nyang-fed PNG LNG venture, roughly doubling the country’s output from 8.5 million tonnes a year to 17 million tonnes.
The companies are targeting delivery of the next volumes of gas to Asian customers by 2024, but face a slew of rival export projects competing for buyers around the same time.
Competitors’ plants including Exxon’s Golden Pass terminal in Texas and Mozambique development, Shell’s Lake Charles unit in the US and Qatar’s own plans to boost capacity.
Global LNG demand increased by 6 per cent in 2018, with growth of 4.5 per cent a year forecast until 2030, according to Oil Search. It expects some 90 million tonnes a year of uncontracted demand by 2025, reflecting increasing demand and expiring contracts.