Papua New Guinea set to proceed with LNG expansion after minor changes to gas accord

Tuesday, 03 September 2019
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Papua New Guinea said it would honour a natural gas agreement with French energy major Total signed with a previous government for the Oceania nation's liquefied natural gas expansion projects after securing some concessions and is now likely to proceed with finalizing a second feed-gas accord.

The decision removes uncertainty over the plan that arose after new Prime Minister James Marape came to power in May 2019 promising to win more benefits from the international oil and gas companies backing the expansion.

The Papua LNG gas agreement is one of two accords needed for Total and its partners, including Exxon Mobil Corp. and Australian-listed Oil Search Ltd and others, to go ahead with the expansion proposals.

“The government has now cleared Total to proceed full steam ahead with the implementation of the Papua Gas Project,” said Petroleum Minister Kerenga Kua in a statement.

Peter Botten, the Managing Director of Oil Search whose headquarters are in PNG, said he was happy with the outcome despite the project delays.

“We are pleased that the PNG Cabinet (National Executive Council), has completed its review of the Papua LNG Gas Agreement and has validated the agreement as executed on 9 April 2019,” stated Botten.

“The next step for the proposed integrated three LNG Train development is the finalization of the P’nyang Gas Agreement,” he added.

Botten explained that once this final step is completed the Petroleum Retention License 15 in the Gulf Province of PNG and the PRL 3 licence in the Western highlands, as well as the overall LNG joint ventures, can proceed into the front-end engineering and design phase of these “nationally important” developments.

Doubts about the gas deal escalated in August when the government suddenly called for talks to revise the agreement.

The minister Kua said Total had made some concessions, promising to prepare a detailed plan outlining how much local equipment and services would be used in the project and to negotiate with any third parties wanting access to the project’s gas pipelines.

Total would also be willing to negotiate for PNG to take a stake in the pipelines after the state has repaid all its loans and costs on the LNG project, and would consider buying LNG carriers in a joint venture with the state.

“Most of these are substantial new concessions on potential future benefits,” state Minister Kua.

The two existing LNG Trains at the plant northwest of Port Moresby have a nominal capacity of 6.9 million tonnes per annum but are actually running close to 9 MTPA.

Three other Trains are planned in the expansion and the five Trains when operational would have an actual capacity of nearly 20 MTPA.

Analysts said the expansion when completed would put PNG into the premier league of global LNG suppliers.


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