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PNG walks away from
P’nyang gas talks
The government has halted talks with ExxonMobil over the P’nyang natural gas development
COMMENTARY
WHAT:
The failure to nd common ground will likely delay plans for new LNG export capacity.
WHY:
The P’nyang development was a key part of the planned expansion of the PNG LNG project.
WHAT NEXT:
Both sides may prefer for new petroleum laws to be passed before nalising any deal.
A planned $13bn expansion of Papua New Guinea’s (PNG) liquefied natural gas (LNG) export capacity is set for lengthy delays a er the government walked away from talks with Exx- onMobil on a key gas project.
PNG Prime Minister James Marape decision to end the talks has once more le the P’nyang gas eld development in limbo.
The P’nyang project, located in the Western Highlands, will support a three-train expansion of ExxonMobil’s PNG LNG terminal at Caution Bay near Port Moresby. Under the proposed expansion, one train will use gas from the P’nyang and PNG LNG elds as feedstock, while two trains will use gas from the Total-led Papua LNG project.
The government has tried for months to secure better terms from the expansion’s lead partners, rst from Total and then ExxonMobil.
e government approved the Papua LNG gas agreement in September a er Total agreed to make several minor concessions. However, Energy Minister Kerenga Kua warned at the time that the government would expect “far better” terms on P’nyang.
Breakdown
Oil Search, a partner in the P’nyang project, said on February 3: “Under the terms proposed by the state, the joint venture partners were unable
to obtain a return on their investment that made the project investable and bankable.”
Reuters quoted an unnamed source close to the negotiations as saying on February 2 that the government had been seeking terms that would “give the state more than the 45-50% take that PNG is set to reap on the returns from the Papua LNG project, and well above the terms Exxon negotiatedin2008foritsPNGLNGproject”.
ExxonMobil operates Petroleum Retention Licence 3 (PRL 3), which contains P’nyang and will feed a new 2.7mn tonne per year (tpy) train, with a 36.86% stake. Oil Search also owns 36.86% of PRL 3, while Santos has 14.32% and Merlin Petroleum holds 11.96%.
Total, meanwhile, operates the PRL 15 joint venture – which is developing Papua LNG’s Elk-Antelope gas discovery – with a 31.1% interest post the state’s back-in right of 22.5%. ExxonMobil owns 28.3% and Oil Search has the remaining 17.7%.
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.
Image: Total
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w w w . N E W S B A S E . c o m Week 05 05•February•2020