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Papua LNG gains new government's support

PNG Cabinet gives Total-led joint venture approval to proceed 'full steam ahead' with project

France's Total has welcomed the Papua New Guinea government's decision to honour the development agreement that underpins the multi-billion dollar Papua liquefied natural gas project.

The operator and project co-owners ExxonMobil and Oil Search have been rattled in the past few months as the recently-installed PNG government had sought to review, and possibly alter, the Papua LNG Gas Agreement.

Following a review of the agreement and negotiations between the two sides, the PNG Cabinet has opted to give the joint venture approval to proceed "full steam ahead" with the Papua LNG project, said Petroleum & Energy Minister Kerenga Kua.

However, there is an expectation that the state wants to see increased national content and future pipeline and shipping ownership benefits linked to the project.

Total had given assurances that the project co-owners are prepared to offer these opportunities to PNG as well as foreign exchange exemptions.

"These agreements now pave the way for us to see much increased national content during the construction phase, future pipeline ownership, future shipping ownership. These are substantial gains," said Kua.

A Total spokesperson said: “We welcome the decision of the PNG Government to honour the gas agreement. It is a positive signal for foreign investment in the country.”

Oil Search, a part owner in Papua LNG, said the company was pleased the PNG Cabinet had completed its review and validated the agreement.

“The Papua LNG project will help deliver billions of kina in value to the PNG economy, support local businesses and provide greater employment opportunities for thousands of Papua New Guineans,” said Oil Search chief executive Peter Botten.

Papua LNG is one component in a proposed three-train LNG expansion in PNG.

The second element is the P’nyang gas project, and the last is three trains at the existing PNG LNG location.

The next step before entering front-end engineering and design of the three integrated components is the finalisation of the P’nyang Gas Agreement.

The co-owners of Papua LNG (Elk-Antelope) are operator Total on 40.1%, ExxonMobil on 36.5%, Oil Search on 22.8% and minority parties on 0.6%. The project, based on development of the Elk-Antelope gas fields, comprises a central processing facility, dual 60-kilometre onshore pipelines for gas and condensate, and dual 265-kilometre subsea pipelines to two new liquefaction trains at the existing PNG LNG facility.

The Elk-Antelope fields contain 6.53 trillion cubic feet of gas and 57.4 million barrels of condensate on a gross best estimate contingent basis.

P’nyang entails development of a gas field of the same name tied back 250 kilometres to the existing PNG LNG upstream facilities.

P’nyang co-owners are operator ExxonMobil, Oil Search, JX Nippon and Santos.

Meanwhile, PNG's government ministers for both the petroleum and mining industries have been instructed by the Cabinet to begin a process of transferring PNG's licensing system to production sharing arrangements.

Kua said the review of the Papua LNG Gas Agreement had illustrated that the nation's concession-based licensing system has "failed PNG" .

"It is envisaged that a PSA will relieve the state of expensive loans and create early free cashflows in all future mining and petroleum projects," said Kua.

bf6c65238f78d685502ac55251b795fa Support: Oil Search chief executive Peter Botten Photo: OIL SEARCH
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