Page 7 - AsiaElec Week 05

AsiaElec COMMENTARY AsiaElec
By linking the two projects, the develop- ers aimed to save $2-3bn in construction costs thanks to the sharing of infrastructure. Reuters cited a Bank of America note as estimating that the separation of the projects could wipe out a third of the proposed savings, while also delay- ing first production from Papua LNG by 18 months until 2026.
“ e two projects are rather entwined. ere’s a bit of uncertainty now. Everything’s going to be delayed for quite a period of time,” the newswire quoted Argo Investments’ senior investment officer, Andy Forster, as saying. Argo Invest- ments owns Oil Search shares.
While ExxonMobil CEO Darren Woods said on January 31 that he hoped to successfully revive the P’nyang talks, he added: “I also think we’ve got some time given all the other oppor- tunities in front of us and, frankly, given where we’re at today in the supply-demand balance of LNG.”
Spot LNG prices on the Platts Japan/Korea marker have fallen to a record low of $3.52 per million British thermal units ($97.36 per 1,000 cubic metres). Warmer weather and rising sup- plies had already undermined prices in recent months, but the addition of China’s coronavirus has helped to depress prices further.
Undetered, Marape said in Facebook post on February 2: “I am sorry but if you show little respect to our motive to gain extra for the coun- try, you will lose my support.”
Opposition
PNG’s decision to walk away from negotiations is in line the government’s increasingly conten- tious stance toward both projects since the mid- dle of last year.
Marape assumed the mantle of prime minis- ter last year a er his predecessor, Peter O’Neill, resigned on May 26 following several high-level defections from his party. Marape pledged not only to continue reforms but also to secure a better deal for the government from natural resource developments.
Marape appointed Kua, an outspoken critic of the gas deal signed with Total in April, as his energy minister in June. Kua then proceeded to
renegotiate the deal with Total while suspending talks on P’nyang.
A er failing to secure anything more than minor concessions from Total, and with inves- tor concern mounting over apparent efforts to back out of the agreement, the government then set its sights on ExxonMobil’s plans. Talks between the two sides began in November, only for the energy minister to reveal that same month that the super-major had rejected Port Moresby’s terms.
Kua said the government’s negotiating team had drawn up terms that were “in line with international standards”. He added: “It is dis- appointing ExxonMobil has refused to even consider these terms and we urge them to reconsider their position.”
e government has suggested that it might prefer to defer the P’nyang project until pro- posed new oil and gas legislation and a revised scal regime are introduced this year.
What next
e PNG government revealed in September that it intended to work with foreign investors in 2020 to review its natural resource extraction laws for the rst time in more than 40 years.
“In early 2020 the government will look at such changes in our regulatory set-up in close consultation with our development partners,” Kua said at the annual LNG Producer-Con- sumer conference in Tokyo. “ is consultation is necessary to ensure Papua New Guinea is walkingforwardinlock-stepwithitsinvestors.”
Given that the two sides appear to be at an impasse, ExxonMobil may prefer to wait and see what new terms the government settles on this year. A delay would also give the company time to analyse and factor current uctuations on the spot market into its long-term strategy.
For his part, Marape also appears content to go slow. His predecessor’s government was widely criticised for signing the deal with Exx- onMobil for the PNG LNG development, which was supposed to stimulate the country’s eco- nomic development, but failed on this front. Port Moresby wants to avoid a repeat of past mistakes.™
Week 05 05•February•2020 w w w. N E W S B A S E . c o m P7