Page 4 - GLNG Week 34 2021

GLNG COMMENTARY GLNG

PNG’s upstream negotiations

create uncertainty

Upstream developers are finding it increasingly difficult to make it past the

negotiating table to sign final deals with the government

POLICY THE Papua New Guinea (PNG) government has we can expect to sign a P’nyang heads of agree-
made it clear over the last coupled of years that it ment [HoA] around the end of this next month
WHAT: wants upstream developers to offer the state the and a gas agreement thereafter,” PNG Minister
ExxonMobil is back best possible terms. for Petroleum Kerenga Kua said last week.
negotiating over P’nyang, The perception that PNG has not benefitted ExxonMobil told Reuters this week that its
while a deadline for sufficiently from its oil and gas industry helped discussions with the PNG government would
Twinza’s Pasca A deal has to bring about a change of government in 2019, be aimed at aligning “on a gas agreement that
been missed. and Prime Minister James Marape’s administra- ensures fair benefits for project stakeholders
tion has pushed for more favourable terms. and the people of PNG”. Further details were
WHY: This has, however, led to breakdowns in nego- not specified.
The government has tiations with ExxonMobil on the P’nyang natu- The P’nyang Area consists of two fields –
adopted an aggressive ral gas development and with Twinza Oil on the P’nyang and P’nyang South – which are located
approach over upstream Pasca A gas project. around 130 km north-west of Hides, the main
negotiations. While ExxonMobil is back at the negotiating field that feeds PNG LNG. P’nyang was discov-
table with Port Moresby, Twinza revealed this ered by Chevron in 1990 and P’nyang South by
WHAT NEXT: week that its “best efforts” were not enough to ExxonMobil in 2012.
PNG may have the upper get government negotiators to sit down with it In 2018, ExxonMobil said that it had increased
hand now because of to sign previously agreed upon final terms by its estimate of the gas resource at P’nyang by
higher LNG prices, but its Port Moresby’s own deadline of August 17. 84% to 4.36 trillion cubic feet (123.5bn cubic
image as an investment This uncertainty could have long-term rami- metres). The proposed development of P’nyang
destination has taken a fications for the country’ investment prospects. might incorporate construction of a new pipe-
beating. line to the field from Hides.
Return to P’nyang During previous talks on P’nyang, ExxonMo-
Talks on ExxonMobil’s P’nyang the project, bil and its partners were proposing to develop
which is located in the Highlands region and will the field to support a third train at PNG LNG,
supply the super-major’s PNG LNG export ter- which currently has a capacity of more than
minal, stalled in late 2019 after the government 8.3mn tpy. However, while this option may still Pull quote to go
pushed for better terms than it had obtained for be on the table, the companies are now consid-
the original PNG LNG development. ering bringing the field online at a later date to in here Pull quote
Port Moresby succeeded in renegotiating the feed the existing trains as current feedstock gas to go in here Pull
terms for the 5.4mn tonne per year (tpy) Papua supplies are depleted, according to previous
LNG project, which is operated by TotalEner- comments from Oil Search, one of the project’s quote to go in
gies. Papua LNG had been set to be developed partners.
in tandem with an expansion of PNG LNG, ExxonMobil and Oil Search also own stakes here Pull quote
underpinned by P’nyang, in a combined $13bn in Papua LNG, where front-end engineering
scheme to raise the country’s liquefaction and design (FEED) work could start next year. to go in here Pull
capacity. However, Marape said in early 2020 News of talks with Port Moresby should be quote to go in
that ExxonMobil had been unwilling to make welcome news, but as Twinza can acknowledge,
any “significant” fiscal concessions beyond anything short of a signed agreement means here.
the terms of its opening offer for developing very little in PNG these days.
P’nyang.
Now that some time has passed – and the Pasca A pickle
LNG market is booming, with expectations Twinza said on August 24 that a deadline for
that demand for the super-chilled fuel will grow talks between itself and the State Negotiating
further still – the parties are willing to try again. Team (SNT) on a final draft of terms for the
“A series of workshops regarding the devel- Pasca A gas agreement had passed without the
opment of the P’nyang gas fields will take place government’s negotiators trying to engage with
over the next couple of weeks and if all goes well, the firm.

P4 www. NEWSBASE .com Week 34 27•August•2021