Total prepared to wait for right PNG gas outcome
A key PNG LNG partner says it’d rather wait a year than go for the slimmed-down project Oil Search now wants.
One of Oil Search’s partners in Papua New Guinea’s $20bn LNG expansion is 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.
The plan to double LNG exports was based on deals to develop two new gas fields.
However, PNG abandoned talks with Exxon on the P’nyang project, leaving French oil major Total in an awkward position after it had sealed terms for the Papua LNG component last September.
Oil Search, with stakes in both fields, said on Monday it would now focus on pursuing a two-train Papua LNG expansion through the existing PNG LNG plant rather than a grander three-train project.
Yet neither Exxon or Total have endorsed that plan, with the French producer seemingly content to wait for Exxon to head back to the negotiating table later this year with the PNG government.
“Our project is joint with that of Exxon,” Total chief executive Patrick Pouyanne said after reporting annual results on Thursday. “There is a need for an agreement and the PNG government is aware of that.”
Total said it favoured sticking with the original plan for a three-train expansion even if it meant more delays to the timeline of first LNG by late 2024.
The “most efficient way to develop the LNG plant is to make an extension of the existing plants and to add three trains,” Mr Pouyanne said. “On the Total side, we are not in a hurry. We are not driven by volume, we are driven by value. So if we have to wait six months, we wait six months. If we wait one year, we are patient.”
The prospect of Papua LNG moving ahead without an associated P’nyang deal appears difficult, Credit Suisse said.
“We still think there is a real chance we see P’nyang negotiations return to the table in the coming weeks. But absent a P’nyang agreement we struggle to see Papua moving ahead given Exxon’s priorities and the time taken to redo pre-engineering work and revisit commercial negotiations,” Credit Suisse analyst Saul Kavonic said. “It appears Oil Search may have gone out on its own in its announcement on Monday without approval from joint venture partners.”
PNG has been under pressure to strike a more lucrative agreement for the state over concern it failed to seal a competitive contract for the original PNG LNG plant which started operating in 2014 and is jointly owned by Oil Search, Exxon and Santos.
Prime Minister James Marape said Exxon — which leads the joint venture — had proposed terms for P’nyang that would have left PNG “out of the money” and failed to pass on significant benefits to the Pacific nation.
Oil Search fell 1.1 per cent to $6.40 on Friday, with its shares shedding 19 per cent in the last month.
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