Page 5 - GLNG Week 39

GLNG COMMENTARY GLNG
of PRL 3, while Santos owns 14.32% and Merlin Petroleum holds 11.96%.
Bigger slice
The government’s determination to improve its share of the proceeds from the country’s gas projects stems from a mounting local perception that the PNG LNG project failed to deliver the economic benefits touted at its inception.
The Jubilee Australia Research Centre pub- lished a report in April 2018 that said household incomes and employment had actually declined since the project began in 2014.
One of the report’s authors, economist Paul Flanagan, said at the time: “One thing we know is that [the project] certainly hasn’t doubled the size of the economy, which was initially pre- dicted. The rest of the economy has actually gone backwards.”
The perceived mishandling of the project generated unrest among landowners in the Highlands Region, who were left without pay- mentfromthegovernmentfromprojectroyal- ties. O’Neill’s successor, James Marape, wants to avoid a repeat of similar unrest over future pro- jects and the government is seeking to overhaul the country’s natural resource extraction laws.
Kua said the government would begin work- ing with foreign investors next year on a review of the laws and that it would look to update its petroleum legislation in 2020 to match regula- tions used by other LNG exporters.
“In early 2020 the government will look at such changes in our regulatory set-up in close consultation with our development partners,” Kua said. “This consultation is necessary to ensure PNG is walking forward in lock-step with its investors.”
He added: “Whilst attracting FDI [foreign
direct investment] in the oil and gas sector, reaping and sharing the rewards involving this valuable resource must be equitable to our devel- opment partners, investors and the host govern- ment and its people.”
What next
The problem the government ran into on the Papua LNG deal was that it was trying to walk back an agreement signed by a previous govern- ment. This creates a particularly bad taste for investors asked to invest in multi-billion dollar projects where return on investment (ROI) can take years from the point of final investment decision (FID).
If the current administration revises an agree- ment signed by the previous government, there is very little to stop the next regime from doing the very same. As PNG opposition leader Pat- rick Pruaitch astutely pointed out at the end of August 30, tearing up the Papua LNG agreement would “jeopardise prospects for PNG’s eco- nomicrecovery”.Pruaitcharguedthatderailing the agreement would make returning economic growth to more than 4% this year extremely dif- ficult. As such, for all Kua’s bluster, the outcome was not overly surprising.
When it comes to P’nyang field, however, no agreement has been signed and Kua’s negotiating team will be sitting down with a much stronger hand after having previously set out its intentions during the commotion over Papua LNG. Moreo- ver, given that the field will feed an expansion of the existing PNG LNG, the government should have an easier time squeezing more from Exx- onMobil. After all, much of the associated cost of development should be lower owing to existing infrastructure that was put in place during the course of PNG LNG’s development.™
If the current administration revises an agreement signed by the previous government, there is very little to stop the next regime from doing the very same.
Week 39 03•October•2019 w w w . N E W S B A S E . c o m
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