Papua New Guinea seeking renegotiation of Papua LNG terms

The Papua New Guinea government has sent a state negotiating team, led by Petroleum Minister Kerenga Kua, to Singapore seeking renegotiation of the terms of the Papua LNG gas agreement with project operator Total SA.

The Papua New Guinea government has sent a state negotiating team, led by Petroleum Minister Kerenga Kua, to Singapore seeking renegotiation of the terms of the Papua LNG gas agreement with project operator Total SA.

The agreement was originally signed by the former Prime Minister Peter O’Neill in April before his removal and the advent of the current government of new Prime Minister James Marape.

An official announcement from the office of the petroleum minister this week stated that the gas agreement was signed “inside the period when serious moves were afoot to remove and replace the [O’Neill] government.”

The ministerial announcement has created confusion surrounding the Papua LNG project and the proposed ExxonMobil Corp.-operated PNG LNG extension project via the development of P’nyang natural gas field as well as sounding a warning note for negotiation of future of Papua New Guinea resource projects.

“The Marape-led government on taking office on May 30, took the firm view that the Papua gas agreement was disadvantageous to the state and the people in certain respects and resolved to seek a renegotiation,” the announcement said.

“Kua cautions that considering what’s at stake, the peoples’ expectations must be guarded during this period. The negotiations could work out well or even disastrously, but either way, the people must be ready to accept whatever the outcome. As a nation we have reserved all our rights in law as we move down this path,” it said.

“Success in the discussions could lead to an early progress of the project. By the same token failure could have very serious ramifications. But failure must not be ruled out and must remain within our contemplation. This is a risk we take as we try to move in the direction of taking [Papua New Guinea] back and making it wealthy. The final outcomes will be briefed to the Prime Minister James Marape and the National Executive Council, and the final decision will be taken by the National Executive Council,” it said.

190816 Papua Ng Elk Antelope MapTotal SA

“Considering our nation’s economic circumstances short and long term, no stone must be left unturned at such important junctures. Kua said it would be futile and worthless to say in the future we should have done this deal differently. That question must be asked and answered now. This is the only diligent approach given how we find ourselves in this spot. The SNT expects to return early next week and report back to the National Executive Council. But Kua says the Prime Minister will be kept informed daily as the negotiations progressed,” it said.

This week’s announcement flies in the face of government assurances earlier in the month that the terms for development of Papua LNG signed off in April would be honoured, albeit potentially with some minor changes.

The only reaction to Kua’s announcement has come from joint venture participant Oil Search Ltd.’s managing director Peter Botten who simply said that the press release from the Minister of Petroleum had been noted and that the company “looked forward to further clarity on the state’s position regarding the agreement and ways forward for the project.”

Total has made no comment although its Chief Executive Officer Patrick Pouyanne has said that he expected the government to respect the agreement.

The proposed Papua LNG project involves development of the Elk-Antelope gas condensate fields in the Eastern Highlands of Papua New Guinea via a preliminary processing facility near the fields and a pipeline—part onshore-part offshore—to PNG LNG’s existing LNG plant at Caution Bay about 25 km west of Port Moresby where two 2.7 million-tonnes/year trains will be built supplied by the Elk-Antelope gas.

A final investment decision on Papua LNG was expected in 2020 with an onstream date in 2024.

Papua LNG is a joint venture of Total, ExxonMobil, and Oil Search.

The separate ExxonMobil-operated proposal for a single-train extension of the existing PNG LNG project, including development of P’nyang field, has yet to reach the gas agreement stage.

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