Tag Archives: Exxon-Mobil

Oil Search works to revive Exxon, Papua New Guinea talks on LNG expansion

Reuters | 25 February 2020

Oil Search Ltd is pressing to revive talks between Exxon Mobil Corp and the Papua New Guinea government over a $13 billion plan to double the country’s natural gas exports, the company’s new boss said on Tuesday.

Oil Search’s new Chief Executive Officer Keiran Wulff said he hoped negotiations could resume “within weeks” between its partner Exxon and the state.

The government ditched talks in January with Exxon on terms for developing the P’nyang gas field to feed an expansion of Exxon’s PNG liquefied natural gas (LNG) plant, amid a push to reap more benefits from resources projects for the impoverished South Pacific nation.

Oil Search’s veteran boss Peter Botten, who just retired as CEO but is still working for the company, is sounding out the government this week on what it would need to resume talks, Wulff said.

“We would hope to see some sort of formal negotiations recommence between Exxon and the state negotiating team within a reasonable period of time,” Wulff told Reuters in an interview after the company released earnings earlier on Tuesday.

“We’re hopeful that it’s weeks. We don’t think it’ll be months,” he said.

Oil Search reported an 8% fall in annual net profit to $312.4 million, hit by weaker oil and LNG prices, missing analysts’ forecasts of around $339 million, according to Refinitiv IBES estimates.

Oil Search’s growth prospects are largely tied to a combined plan to develop P’nyang and Papua LNG, led by France’s Total SA, to feed three new processing units, called trains, at Exxon’s PNG LNG plant.

All the partners want a three-train development, Oil Search said, as sharing infrastructure would be the most efficient way to develop P’nyang and Papua LNG.

“For us we’re strongly behind the operator to pursue a three-train development, which is as much in the joint venture’s interest as it is in the state’s,” Wulff said.

He said they would only consider a two-train development without P’nyang “after all options were exhausted”.

Exxon Mobil had no immediate comment, but Chief Executive Darren Woods said earlier this month the company hoped to revive talks on P’nyang to get to a “win-win proposition”.

The coronavirus has dampened demand for LNG from China, but Oil Search said it expected that only to be a short term issue.

“We are confident in our ability to secure LNG offtake agreements once we resume discussions with potential Asian buyers, due to the attractiveness of LNG from PNG,” Botten said in a statement.

If an agreement is reached on P’nyang and early engineering work on a three-train development begins in 2020, Oil Search expects its capital spending this year will be in the range of $710 million to $845 million.


Leave a comment

Filed under Mine construction, Papua New Guinea

Booting Exxon gives Marape a boost – for now

Western Highlands province in Papua New Guinea, the region of the proposed P’nyang LNG development (ADB/Flickr)

The rejection of the P’nyang LNG deal signals a new way of doing business, and a shifting landscape for US concerns.

Bal Kama | The Interpreter | 19 February 2020

The recent announcement of the Papua New Guinea (PNG) Government to cease all negotiations with one of the United States’ largest oil and gas companies, Exxon Mobil, over the P’nyang LNG project, a new gas field in PNG, has broader implications for the US and Papua New Guinea.

At first glance, the decision against Exxon for allegedly acting in bad faith is part of a wider crackdown by the government of Prime Minister James Marape to ensure greater fairness in the resource sector. Since ousting then–Prime Minister Peter O’Neill in a vote of no-confidence in 2019, Marape has charted a different approach from that of his predecessor, under the banner of “Take Back PNG” – a larger policy objective to reassess PNG’s developmental direction and regain lost opportunities. Marape laid out his vision in his inaugural visit to Australia in 2019 and is gradually applying it in many sectors.

The decision illustrates the growing frustrations of dealing with investors in resource-rich PNG, and it further demonstrates an emerging crop of PNG leaders confident in reassessing the status quo. For the US, Exxon’s alleged conduct, criticised by the PNG government as being “exploitative”, undermines US efforts in the Pacific region as a force for good.

Exxon Mobil has a US$19 billion liquefied natural gas project in PNG (PNG LNG), which made its first shipment in 2014. The PNG LNG project, which remains the largest economic investment by the US in the Pacific, coincided with former US President Barack Obama’s announcement in 2012 of a “pivot to the Pacific” policy. The geopolitical scenario of the day, the excitement of having the US interested in PNG, and the high expectations surrounding a global and reputable company, among other factors, influenced the PNG government’s initial agreement for Exxon to operate the PNG LNG project. It was thought the deal would have a transformational impact on PNG’s economy – an assurance that continues to be projected by some quarters.

However, the overall economy of PNG did not experience the projected windfall. Instead, there were a series of negative outcomes over the years at both a national and a local level – national debts grew, and unfavourable benefit-sharing arrangements and royalties led to conflict among traditional resource landowners. Many have questioned whether the resource boom marked by the PNG LNG project was in fact a “resource curse”.

“Absolute bad faith”

The ousting of Prime Minister Peter O’Neill in 2019 was partly a result of growing grievances over the failure to deliver on the promises of the Exxon-led project and other resource deals. An important issue was the high level of concessions made in those deals. Historically, PNG governments, desperate to become investor-friendly, have made hasty concessions that often disadvantaged the country from having a fair share of the revenue from the development of their resources.

In a 2016 report, the International Monetary Fund (IMF) observed that “the tax arrangements for PNG’s mining and petroleum sectors are very generous compared to other resource-rich countries and do not reflect the maturity of the PNG resource sector”. The World Bank, in a 2017 report, also found particularly for the Exxon-led LNG project that Exxon Mobil and its PNG LNG partners created “a complex web of exemptions and allowances that effectively mean that little revenue is received by government and landowners”.

The PNG government must share some burden of fault for creating this scenario – including, for instance, the failures by previous PNG governments to negotiate a favourable outcome for the country, the misuse of funds by political leaders, a politicised bureaucracy unable to carry out their due diligence, and judicial interventions that at times hinder payments to disgruntled landowners.

This does not, however, excuse Exxon and its partners from the grave unfairness suggested in these reports. This, together with his experience as a minister in previous governments, underpinned Marape’s firm stance on taking a different approach in the current deal on the P’nyang LNG project. In his appeal for Exxon Mobil to act fairly, Marape noted that “the initial terms [in the PNG LNG project] provided by PNG were so generous” and that new “reasonable terms” should be considered for the P’nyang project.

Papua New Guinea’s Prime Minister James Marape (C) at Parliament House in Canberra, during a six-day visit to Australia in July 2019 (Mick Tsikas/AFP via Getty Images)

The terms proposed by the PNG government are not publicly available, but they appear to include giving no fiscal concessions in P’nyang, treating it as separate project from the current LNG projects and increasing domestic market obligations, local content participation, and landowner’s royalties from the current rate of two percent. The Prime Minister described Exxon’s refusal to accept the terms as a move to “extract even more profit for themselves”, while Kerenga Kua, the Minister for Petroleum and Energy denounced Exxon as acting in “absolute bad faith” and coming into PNG “with a determination to exploit our vulnerabilities, exploit us for our weak economic position and take advantage of us”.

A principled populist

The firm position taken by the Marape government is historic – no previous government has ever taken such an approach. PNG has had resource deals in the past that have resulted unfavourably for the country, but past governments have been shown to align more closely with investors than with their citizens.

The leaders and the people of PNG appear to be supportive of Marape’s approach. Further, the government is considering amending and tightening the legislative framework to ensure an equitable resource sector.

Marape is unlikely to concede to Exxon Mobil, as he insists: “You win for your shareholders, and I win for my people”. James Donald, a Member of Parliament representing the area where P’nyang LNG site is located, cautioned Exxon against crossing “a line between commercial parity and commercial greed”. Other MPs representing the resource areas have also demonstrated support for Marape’s stance against Exxon.

The PNG government is likely to reconsider its current position if Exxon responds positively to its terms. Unless that happens, however, there appears to be a general distrust for Exxon among the people of PNG – a situation far from the hope Exxon represented when it first entered the country. The distrust for Exxon has broader implications when one considers Exxon not only represents US economic prestige in the Pacific, but a society whose business ideals are expected to reflect the democratic values of fairness and just outcomes. The longer this tussle between Exxon and the PNG Government continues, the greater the distrust is likely to be, not only for Exxon, but for what it represents – the United States – in the Pacific.

As the vote of no-confidence scheme against a sitting government in PNG resumes later this year, those affected by Marape’s firm policies may hope for a change in government. In the fluid political landscape of PNG, a populist and comparatively principled Marape faces a challenge beyond just his immediate political rivals, and inside company boardrooms. However, if anything, his approach to governance so far has been reassuring for the people of Papua New Guinea.

Leave a comment

Filed under Financial returns, Mine construction, Papua New Guinea

PNG PM urges multi-nationals to allow gas project to proceed

Papua New Guinea’s prime minister James Marape. Photo: PNG PM Media Unit

Radio New Zealand | 8 February 2020

Papua New Guinea’s prime minister has urged two energy companies not to hold a major LNG gas project in his country to ransom.

James Marape’s appeal to ExxonMobil and Oil Search follows the failure of negotiations with the former over the fledgling $US13 billion P’nyang gas project

Oil Search said PNG was demanding terms of Exxon that meant the project developers would not gain a sufficient return on their investment.

But Mr Marape accused Exxon of a “lack of interest” to meet PNG halfway by offering concessions for a better state take from the deal.

The failure of the negotiations has raised doubt over the future of the separate Papua LNG gas project signed with French major Total.

Mr Marape said he called upon the two multi-nationals, as beneficiaries of concessions previous governments have given, to work with Total to deliver Papua LNG.

However, he appeared to leave the door open for an agreement with Exxon over the P’nyang gas project proceeding.

He said in the interests of fairness, a Ministerial Gas Committee would request both the state negotiating team and ExxonMobil to present their positions for the State – through a committee of leaders – to decide what is the best outcome for PNG.

The prime minister said he had indicated on all levels of discussions that fundamental policy principles that influenced his government’s mindset would not change.

“These include no fiscal concessions in P’nyang, treating P’nyang as separate from both PNG and Papua LNG projects, increase in Domestic Market Obligations and local content participation,” he said.

“These will be fundamental in progressing P’nyang.

“In the meantime, I call upon ExxonMobil and Oil Search not to hold the Total project in Gulf to ransom.

“If you model the project to be uneconomical, then don’t push it: let’s leave the gas in my land and you develop Papua plus further work in PNG LNG.

“After SNT and ExxonMobil present to the MGC, Cabinet will decide on P’nyang.”

Mr Marape said his government would shift focus to Wafi-Golpu and Porgera mines, and other resource sectors so life in PNG was not only dependent on P’nyang and other LNG gas projects.

Leave a comment

Filed under Financial returns, Mine construction, Papua New Guinea

MPs stand firm with Prime Minister over Exxon rejection

Western Province MPs stand firm with Prime Minister James Marape over refusal to sign agreement with Exxon Mobil

“We will not surrender our dignity nor our sovereignty”

Hon Taboi Awi Yoto, MP, Governor Western and Hon. James Donald, MP, Member for North Fly | 5 February 2020


We fully endorse the decision of our Prime Minister to cease negotiations with ExxonMobil on the P’nyang LNG Project. Our Prime Minister has demonstrated wisdom based leadership through the eye of the storm.

Our historical participation in the P’nyang negotiations, gave us a comprehensive understanding of the State’s and ExxonMobil’s proposed takes in the project. FRPG Term Sheet outlined projects that added further value to the country’s total share. Our PEC sanctioned policy can become the blue print for project host provinces whereby clusters of industrial hubs can be grown on the back of resource extraction and independent from Waigani.

ExxonMobil and Oil Search wanted maximum benefit for their shareholders in the P’nyang Project. But at what cost to PNG? Are we not entitled to a fair deal? Having done so well in the foundation project, we were expecting ExxonMobil and Oil Search to display commercial fairness and reasonableness – evidently they chose to discard these core virtues.

ExxonMobil/Oil Search asserted that gaps in the Asian LNG market created by maturing off-take agreements, opened a small but fast closing window of opportunity for our gas. Further substantial cost savings would be realized by combining the EPC contracts for Papua trains with P’nyang’s. Both companies pushed National Government and FRPG to accelerate P’nyang development, including statutory compliances. During the negotiations, ExxonMobil claimed Papua’s development was conditional on P’nyang being licensed first. And so it begs the questions, why didn’t ExxonMobil bring into production the proven and certified gas fields in foundation project like Juha? Why are several of foundation project’s gas fields being warehoused with no certainty of delivery to Caution Bay? Why is P’nyang being pushed for development when warehoused fields have yet to be monetized? Why must our Government bear solely the social cost for warehoused gas fields? State sought terms considered commercially reasonable and consistent with regional industry practices, so why couldn’t ExxonMobil and Oil Search make at least some concessions, especially when the PNG LNG Project delivered a windfall for both companies at the expense of our People? Where do you draw the line between commercial parity and commercial greed?

Peter Botten has gone to the media stating that our terms compelled ExxonMobil and Oil Search to abandon P’nyang because they would not be able to achieve a return on their investment. What Mr. Botten has intentionally and maliciously elected not to disclose is that in February 2019, ExxonMobil and Oil Search informed the State that project would cost $7 billion. On the eve of P’nyang Gas Agreement Negotiations, both companies increased capex to US$12 billion. The inflated capex reduced substantially the ideal investment hurdle rate. SNT went to great lengths to argue that capex was highly exaggerated but ExxonMobil and Oil Search refused to accede. Was the capex deliberately and maliciously increased to secure favorable terms for ExxonMobil and Oil Search? Yes.

The last person to be criticizing PNG Government is Mr. Botten. He should be thankful that he is still employed because of the sacrifice our People made when we lost US$400 million in a scheme he supervised and diligently implemented through the now infamous UBS Loan. We are still bleeding from the first stab. Mr. Botten is heartless by inflicting another wound. Mr. Botten will be retiring in his golden parachute, but what about the Kubutu People who still lack after 32 years of oil production, electricity and running water?

ExxonMobil and Oil Search promised our leaders the great economic miracle PNG LNG would deliver. Many outcomes were guaranteed. Trusting the ExxonMobil brand, we signed away our sovereign rights. Sadly, many of those promises are yet to materialize.

We are steadfast in our resolution that the Oil & Gas Act needs to be amended urgently. The legislation leverages financial and legal benefits to foreigners than to our Country. The amendments are in line with what other hydrocarbon producing nations have successfully enacted in the last 10 years.


We have instructed lawyers to review the Stanley Gas Agreement. Legal proceedings will be filed shortly to ascertain whether Horizon Oil and its joint venture partners are entitled to continue to enjoy the unbounded generosity of PNG or in the alternative whether the landowners, LLGs and FRPG are due for financial compensation for the questionable delayed development.

We believe the Stanley Gas Agreement is unconstitutional because it strips the State of its most basic sovereign rights. There are no penalty clauses for failure to achieve FEED, FID and construction. Shockingly, State has no recourse to terminating the license consequential to fundamental breaches. The deliberate exclusion of these mandatory sunset clauses, has given the developers unfettered latitude to deciding, at their own volition, the development schedule for Stanley.

The Stanley PDL has been used to conduct substantially valued farm-outs. Ironically none of these transacted monies have been reinvested in Stanley’s construction. For several years now, the developers have not engaged neither communicated with FRPG and landowners. Accordingly we have reached the conclusion that Stanley Gas Fields may never reach commercial production under Horizon Oil as the nominated developer.

The Stanley Gas Agreement and PDL is unprecedented and entirely at odds with established industry practices. How and why did Horizon Oil and its partners vouch for Stanley’s FID being achieved by or before 31st December 2014 and construction to begin in 2015? If State had known that Horizon Oil and its partners would fail to achieve the milestones of FID and construction as scheduled, would it still have signed the Gas Agreement and issued PDL? No. Did Horizon Oil and its partners deliberately and maliciously misled the State to sign Gas Agreement and issue PDL? Yes.

Surely we acknowledge developers/investors are needed to prove up resources. Legislated incentives are on offer to bring onshore investment dollars. However, any conduct or action that is clearly deceptive, or a Gas Agreement that licenses the ransacking of our resources with negative netback gains for our People, or lack of development thereof to the detriment of our People, will be rejected completely.

We will not surrender our dignity nor our sovereignty.

Leave a comment

Filed under Financial returns, Papua New Guinea


Shirley Mauludu | The National aka The Loggers Times | February 4, 2020

PETROLEUM and Energy Minister Kerenga Kua says the decision to walk away from a deal regarding the P’nyang gas project in Western was made in the “best interest of the country and people”.

The minister, in an interview with The National yesterday, said since Friday, which was the deadline for discussions, he had been getting positive comments from leaders and the public on the decision the State, through the state negotiating team, had made. “Since negotiations collapsed on Friday, a majority of the people, and the leaders that I have spoken to, are clapping their hands,” he said.

“They are happy.

“They say this is the single most positive thing that has ever happened to this country.

“They are very happy about the fact that there is no deal because they are fed up of not receiving a fair share.

“They are clapping their hands because the state negotiating team has done the right thing in asking for what is fair.

“The resource in the ground has been there for millions of years so it can stay in the ground for another few years, it’s not a problem.

“We won’t do a deal in P’nyang but other deals will still go ahead.

“We will still raise revenue in other areas to develop our country.

“P’nyang is not the only place that has development potential for us.

“We are a developing nation.

“We need money for all kinds of things that needs to be developed and we have to make it in this resource, an available resource.

“But if our partners refuse to give us a fair share, we will not be able to deliver up to the people’s expectations.”

Meanwhile, Kua further explained the licence that ExxonMobil had for the development of the project.

“The State does acknowledge that Exxon has some residual rights to the petroleum retention licence,” he said.

“They have in accordance with our law, filed an application for a development licence.

“What they have is a retention licence.

“Our law says that before that licence expires, you can apply for a development licence and if you do so, your rights under the retention licence continue even though it had already expired until your application for development licence is fully decided by the petroleum development board.

“That’s the reason why, we were able to do the negotiations.”

Leave a comment

Filed under Financial returns, Papua New Guinea

Exxon Partner Fires Back at Papua New Guinea in Gas Fall-Out

  •  State terms for P’nyang project not bankable, Oil Search says
  • Oil Search shares plunge 11.5% Monday to lowest since August

James Thornhill | Bloomberg | February 3, 2020

Exxon Mobil Corp.’s partner on a Papua New Guinea gas project that’s threatened by failed talks with the government hit back at the state’s position on Monday, saying its terms were uneconomical.

Oil Search Ltd., in its first comment since the talks broke down Friday, said that the government’s demands meant the project would not gain a sufficient return on investment. The impasse casts doubt on a broader $13 billion plan to double the country’s exports after Prime Minister James Marape, who came to power on a promise to increase the nation’s share of resources wealth, said Friday that Exxon’s proposed terms were ‘out-of-the-money’ for PNG.

The country’s take from the project would have been “significantly less” than deals done elsewhere in the region, including Malaysia, where Exxon has a big operation, Marape said Friday. The size of the resource, cost of development and the unique challenges of operating in PNG made comparisons with other arrangements in the region “misleading,” according to Oil Search.

“For Oil Search, the project returns under the State’s proposed terms were approximately the same as our cost of capital, on an unrisked basis,” Managing Director Peter Botten said in a statement to the Australian Stock Exchange.

The company’s shares ended Monday down 7.2% at the lowest closing level since Sept. 3, and having lost as much as 11% intra-day, as investors reacted to the latest setback to the group’s expansion plans in PNG.

The failure of the P’nyang talks has cast doubt on the future of Total SA’s Papua liquefied natural gas project. While the government has already reached agreement with the French company on that project, the business case of Papua was based in part on sharing infrastructure costs to expand the existing PNG LNG processing facility.

“With the talks failing, and P’nyang now stalled, we now see the most probable outcome being the PNG expansion (including Papua) stalls,” said Morgans analyst Adrian Prendergast in a Feb. 2 note.

Oil Search said it would “seek to advance the Papua LNG project in a timely way,” but added that several engineering and commercial changes would need to be made following the P’nyang delay. Meetings with the Papua joint venture partners, which also includes Exxon, were planned in the short term, the company said. A spokesman for Total in Papua New Guinea did not immediately respond to a request for comment.

“Papua is looking at a material delay which could push a final investment decision well into 2022,” said Saul Kavonic, energy analyst at Credit Suisse.

Total is currently targeting an FID in 2021. Further delay could see the expansion plan slip further down the queue in terms of projects competing globally for contractors and long-term offtake contracts.

“Trailing in the wake of the biggest wave of new LNG supply the industry has ever seen is not ideal,” said Angus Rodger, research director at energy consultancy Wood Mackenzie, adding that any reassessment of how the project is structured would inevitably require lots more time.

Marape doubled down on his criticism of Exxon in a Facebook post Sunday, saying the company was “not sincere” in dealing with the government on P’nyang. Referring back to the original Exxon-led PNG LNG project, which started in 2014, Marape said that “to date my families, my tribes and my provinces and country are yet to fully see those promised windfalls yet the state continues to foot the social cost of this project.”

1 Comment

Filed under Financial returns, Papua New Guinea

Papua New Guinea LNG expansion plans in limbo after talks collapse

Sonali Paul | Reuters | February 2, 2020

Plans to double gas exports from Papua New Guinea within the next four years are in doubt after the government walked away from talks with Exxon Mobil Corp on a key gas project needed for the $13 billion expansion.

Papua New Guinea Prime Minister James Marape on Friday called off negotiations with Exxon on the P’nyang field, blaming the energy giant for failing to budge on a proposed deal that was “out of the money.”

The expansion of liquefied natural gas exports is crucial for the impoverished Pacific nation, but is vying with several proposed LNG projects in Australia, Mozambique, Qatar, Russia and the United States.

One of Exxon’s partners in the PNG project, Oil Search Ltd , said on Monday the terms the government had sought would have made the project unprofitable.

“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,” Oil Search said in a statement to the Australian stock exchange.

Shares in Oil Search fell as much as 11.5% early on Monday in their first session since the collapse of the talks, on track for their worst one-day fall in more than four years.

The P’nyang agreement was one of two agreements needed for Exxon and its partners to go ahead with a $13 billion plan to double LNG exports from the Pacific nation. The other agreement, the Papua LNG pact, was sealed with France’s Total SA in September.

The government was seeking terms on P’nyang 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 negotiated in 2008 for its PNG LNG project, a person close to the negotiations said.

P’nyang and Total’s Papua LNG project were designed to feed three new processing units, called trains, at Exxon’s PNG LNG plant, with the two projects sharing infrastructure in order to save $2 billion to $3 billion dollars on construction costs.

Oil Search said on Monday it would now focus its attention on the Papua LNG project, which will feed two new trains, adding 5.5 million tonnes per annum (mtpa) to the plant’s 8 mtpa capacity. Joint venture partners are set to meet “in the short term” to plan their next steps, it said.

Bank of America analysts estimated that separating the projects would pare the cost savings by a third and delay first production from Papua LNG by 18 months to 2026.

“The two projects are rather entwined. There’s a bit of uncertainty now. Everything’s going to be delayed for quite a period of time,” said Andy Forster, senior investment officer at Argo Investments, which owns Oil Search shares.

Exxon Chief Executive Darren Woods said on Friday the company hoped to revive talks on P’nyang to get to a “win-win proposition” but flagged that the company was in no hurry as it had other projects it could advance elsewhere.

“But I also think we’ve got some time given all the other opportunities in front of us and, frankly, given where we’re at today in the supply-demand balance of LNG,” Woods told analysts on the company’s quarterly earnings call last Friday.

A global glut of LNG has driven spot LNG prices to more than 10-year lows below $4 per million BTUs (mmBTU), posing challenges for projects looking to line up long-term customers.

PNG Prime minister James Marape, who came to power last May on a pledge to reap more benefits from the country’s abundant mineral and energy resources, on Sunday said he was comfortable with the hard line he had taken.

“I am sorry but if you show little respect to our motive to gain extra for the country, you will lose my support,” Marape said in a post on Facebook.

Total has made no comment on the collapse of the P’nyang talks.

1 Comment

Filed under Financial returns, Papua New Guinea

Papua New Guinea scraps talks with Exxon on P’nyang gas project

Nikhil Subba and Sonali Paul | Reuters | 31 January 2020

Papua New Guinea on Friday called off negotiations with Exxon Mobil regarding the P’nyang gas project, casting a shadow on a $13 billion plan to double the country’s gas exports by 2024.

The government said Exxon had refused to budge on the financial terms for developing the gas field and failed to come up with an offer that it could accept.

The P’nyang field was key to helping feed the expansion of Exxon’s PNG LNG plant, which it operates with partners Oil Search and Santos, among others.

The P’nyang agreement is one of two agreements needed for Exxon and its partners to go ahead with their $13 billion plan to expand LNG exports. The other agreement, the Papua LNG pact, was sealed with Total in September.

“Exxon Mobil’s offer had barely changed from its opening offer presented last November,” Prime Minister James Marape said in a statement, adding that it was not “substantially different” from a recent LNG agreement with Total.

The country is hoping Total will still go ahead with its Papua LNG project, a person close to the negotiations said.

Exxon Mobil’s Papua New Guinea spokesman was not immediately available to comment.

The country’s petroleum minister had said last year that the government would press Exxon for “far better” terms on the P’nyang gas project than it had with the Total agreement.

The government was seeking terms that would give the state more than the 45-50% take that the country is set to reap on the value of Total’s Papua LNG project, the person said, adding that the share was much less than the 80% take that governments like Malaysia and Indonesia have on gas projects in their countries.

Leave a comment

Filed under Financial returns, Papua New Guinea

PNG Petroleum Minister Kua brushes aside claims of Threats on Gas Project

NBC News | 23 January 2020

Papua New Guinea Petroleum Minister Kerenga Kua has brushed aside claims of threats to close gas projects in Western Province.

This follows, Governor, Taboi Awi Yoto and North Fly MP, James Donald claims, the State Negotiating Team has poorly negotiated for the province and the landowners over the P’nyang Gas Project’ with the developer in Singapore last week.

The leaders have threatened the government to close P’nyang and Stanley LNG Projects before the close of business this Friday until the Oil and Gas Act is amended.

In his response, Minister Kua says constitutional law allows all minerals and petroleum is owned by the State and not by provinces and landowners.

He said only the State is empowered to commercialise these resources, and no other entity is by law empowered to do this.

Mr. Kua said leaders at all levels are entitled to express their views on issues related to resource project negotiations but State will make the final decision.

The Petroleum Minister urges leaders to remain calm as P’nyang Ministerial Committee is always on hand to discuss any discontentment.

Leave a comment

Filed under Financial returns, Papua New Guinea

Pressure rises in PNG gas standoff

The P’nyang gas agreement is becoming a test case for the Marape government’s promise to stand up to resource extraction firms

Craig Guthrie | Petroleum Economist | 22 January 2019

Papua New Guinea (PNG) failed again in mid-January to agree fiscal terms with ExxonMobil for the development of its onshore P’nyang gas field, raising the stakes for all parties involved in a wider project to double gas exports.

The failure of the state team negotiating in Singapore piles political pressure on the PNG government; Prime Minister James Marape rose to power last May on the back of pledges to reap more revenue from international resources firms and lift the vast South Pacific archipelago out of poverty.

It also increases the financial strain on private stakeholders. The P’nyang gas agreement needs to be sealed before a complex pre-Feed process can start for a larger associated liquefaction project, the $13bn Papua LNG, led by Total but also involving ExxonMobil and others, which is targeting FID this year and production in 2024.

PNG-based oil and gas exploration and development company Oil Search, a partner in the P’nyang (36.86pc) and Papua LNG (17.7pc) projects, stated last October that the delays meant it reduced capex on the project by 15pc last year, while noting engineering work and marketing cannot get underway until the talks progress.

ExxonMobil refused a deal offered by oil minister Kerenga Kua at the first round of talks last November. Kua said this was “disappointing”, claiming the terms, which remain confidential, were in line with similar extraction arrangements in place in Indonesia and Malaysia. Fresh from disappointing renegotiations with Total, PNG wants benefits that are “far greater than Papua LNG” and is seeking “a good deal, not a fast deal”, the negotiating team stated.

“In the P’nyang talks, the government appears to be seeking a better tax take, more local content and jobs opportunities, more project information from the operator, and a firm commitment to development of P’nyang in a defined timeframe,” says Credit Suisse analyst Saul Kavonic.

P’nyang, which is estimated to hold 4.4tn ft³ of gas in the West Highlands province, would support an additional train at the Papua LNG project (Total will supply the other two from separate fields). Each of the three trains will have capacity to produce 2.7mn t/yr. Once operational these would double PNG’s 2020 LNG exports, which are all produced at ExxonMobil’s PNG LNG facility at Caution Bay. Papua LNG is planned to share certain brownfield facilities as well as feedgas and export facilities with PNG LNG.

Weakened hand

A Fitch Solutions report last September warned that PNG’s fiscal position had worsened year-to-date. “The country has struggled to establish sustainable revenue streams to meet spending requirements, leading to persistent budget deficits, an unsustainable build-up of public debt and greater exposure to adverse economic or financial shocks,” noted Fitch.

PNG expert Colin Filer, of the Australian National University’s College of Asia and the Pacific, says ExxonMobil is “playing hard ball” because the projects are such a small part of its global portfolio. “It believes it can hold the PNG government’s feet to the fire, because of its fiscal woes”.

Australian bank ANZ stated in December that the lack of a P’nyang breakthrough will delay the forecast national economic recovery by 12 months. “A longer project dialogue will push the recovery out further, with a risk that extended negotiations could derail the economic upturn.”

The government also faces the ongoing threat of local resistance from West Highlands landowners. Regional leaders stated on 21 January that they had withdrawn their support for the agreement as it has “not incorporated their interests”.

Papua LNG also faces a wave of global competitors targeting an anticipated spike in demand for LNG in the mid-2020s that may or may not materialise. “A P’nyang gas agreement remains a precursor to the entire PNG LNG expansion project, which is competing for a rapidly narrowing market opening later this decade,” says Kavonic.

Leave a comment

Filed under Financial returns, Human rights, Papua New Guinea