Tag Archives: Kerenga Kua

KUA: WALKING AWAY WAS BEST

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.”

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Talks on PNG LNG expansion at a standstill – govt

PNG Liquefied Natural Gas Plant near Port Moresby. Photo: Richard Dellman.

Radio New Zealand | 28 November 2019 

Talks with oil and gas giant Exxon Mobil over an expansion of their huge LNG (Liquefied Natural Gas) project in Papua New Guinea are at a standoff, with the company unwilling to negotiate on the country’s terms, says PNG’s petroleum minister.

Kerenga Kua said the state’s negotiating team had set out draft terms for negotiations on developing the P’nyang gas field that were in line with international standards and would ensure a “fair deal” for PNG.

It was disappointing that Exxon has refused to consider the terms and PNG urged them to reconsider their position.

Reuters reports that the new delay to the P’nyang agreement will make it harder for Exxon and its partners Total SA, Oil Search and Santos Ltd to reach a final investment decision in 2020 on their plans to double LNG exports from the country.

Exxon Mobil’s PNG spokesman said discussions with the PNG government were ongoing and an agreement was needed before decisions could be made on preliminary engineering and design for the expansion of its PNG LNG plant.

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Oil Search’s LNG expansion uncertain as Exxon rejects PNG’s terms

Angela Macdonald-Smith | Australian Financial Review | November 22, 2019

Oil Search’s year-end target for reaching a deal with the Papua New Guinea government – so that work can proceed on a planned $US14 billion ($20 billion) expansion of liquefied natural gas – is uncertain after the parties failed to agree on terms or even the state of the negotiations.

PNG petroleum minister Kerenga Kua released a statement on Friday expressing “disappointment” with the progress of talks after ExxonMobil, the lead partner in the LNG venture, “refused to consider the state’s proposed terms”.

Mr Kua said the proposed terms, which were not disclosed, are “based on international best practice”. They are understood to involve a higher tax rate and a more onerous domestic gas requirement than under a similar earlier deal for the separate but related Papua LNG project.

But ExxonMobil said the discussions with the PNG government to complete were continuing. “An agreement is needed before decisions can be made regarding front-end engineering and design for the three-train development at the PNG LNG plant site,” an ExxonMobil spokesperson said.

Exxon, French major Total and Oil Search need to reach an agreement on the fiscal and other terms related to the development of the P’nyang gas field to proceed with the LNG expansion. The earlier deal for Papua LNG was struck under the former government of Peter O’Neill, while the new government, led by James Marape, has taken a much tougher line on resource development, demanding that more benefits flow to the PNG economy and local communities.

The partners need the second deal to be tied up before they can proceed with engineering work on the three-train expansion, which involves both Papua LNG and the expansion of the existing PNG LNG project, fed by the P’nyang field.

Credit Suisse analyst Saul Kavonic told clients the statement supported his view that the PNG government was seeking “much tougher” terms on P’nyang than for Papua LNG.

That risks prolonging negotiations, delaying engineering work and potentially putting the final investment decision at risk for the whole project, which he calculates is worth $2.40 a share for Oil Search.

Shares in Oil Search dipped when the statement was released, but still closed up 1.1 per cent at $7.24 on Friday. Neither Exxon nor Oil Search would immediately comment.

Revenues ‘critical’

Mr Kua described the P’nyang field as the last significant LNG opportunity in PNG, and said the revenues from development were, hence, critical for the nation.

He said the team negotiating the deal on behalf of PNG had carried out “extensive” preparatory work to draft terms in line with international standards to ensure a good deal for the PNG people. The revenues would be used for infrastructure, health and education.

“It is disappointing Exxon has refused to even consider these terms and we urge them to reconsider their position,” Mr Kua said.

According to a source familiar with the situation on the PNG side, Exxon has sought to table its own proposed agreement as the starting point for discussions.

Mr Kua said that while the negotiating team was committed to working with international oil companies to develop PNG’s natural resources as quickly as possible to support the development of PNG, “our resources cannot become money‐making machines for oil companies at the expense of the nation”.

Oil Search’s outgoing managing director Peter Botten has previously underscored the importance of a timely agreement on the gas development so that the LNG expansion doesn’t miss a market “window” for new demand expected to emerge mid next decade.

The timing of the expansion has already been delayed by many months owing to the difficulty of the negotiations, particularly after the change of government.

Mr Kua said the terms PNG proposed were comparative to those for oil and gas projects in Indonesia and Malaysia.

“We have asked Exxon to be transparent about their costs and intentions with P’nyang, so we can move forward with negotiations and secure a deal that is beneficial for PNG and project partners,” the minister said.

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Papua New Guinea flags talks with Exxon on $13 billion gas expansion hit impasse

Reuters | 22 November 2019

Papua New Guinea’s petroleum minister flagged on Friday that talks with Exxon Mobil Corp tied to a $13 billion gas expansion had reached an impasse as the U.S. oil giant was unwilling to negotiate on the country’s terms.

The state’s negotiating team had set out draft terms for negotiations on developing the P’nyang gas field, which Petroleum Minister Kerenga Kua said were in line with international standards and would ensure a “fair deal” for PNG.

“It is disappointing Exxon has refused to even consider these terms and we urge them to reconsider their position,” Kua said in a statement emailed to Reuters.

Exxon Mobil’s PNG spokesman was not immediately available to comment.

The P’nyang agreement is one of two agreements needed for Exxon and its partners Total SA, Oil Search and Santos Ltd to go ahead with a $13 billion plan to double LNG exports from PNG.

The other agreement, the Papua LNG pact, was sealed with Total in September.

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PNG to seek more from Exxon on P’nyang deal than Total’s Papua LNG

“It has to be better. It has to be far better. That’s the key point.”

Jessica Jaganathan and Sonali Paul | Reuters | September 25, 2019

Papua New Guinea will press Exxon Mobil Corp for “far better” terms on its P’nyang gas project than the government secured in a recent agreement with Total SA for its Papua LNG project, the country’s petroleum minister said.

The P’nyang field will help feed an expansion of Exxon’s PNG LNG plant. If negotiations for the project are protracted, that could delay Exxon’s $13 billion plan with Total’s Papua LNG to double the country’s liquefied natural gas exports by 2024.

Talks on P’nyang were put on hold earlier this year when the government sought to revise Total’s Papua LNG agreement. That deal was finally endorsed in early September, with minor concessions from Total.

Formal talks on the P’nyang project have yet to begin, with the government waiting for information from Exxon, PNG Petroleum Minister Kerenga Kua told Reuters on the sidelines of the annual LNG Producer-Consumer conference in Tokyo.

Asked whether the government would seek the same terms from Exxon on the P’nyang project as it secured from Total, Kua said: “It has to be better. It has to be far better. That’s the key point.”

Exxon Mobil, which is also a partner in the Papua LNG project, said it is looking forward to working with the PNG government to conclude the gas agreement for the P’nyang project ahead of decisions on design work for the addition of three new processing units, called trains, at PNG LNG.

“The verification of the gas agreement for the Papua LNG project confirms the commitment of all parties to make the project a success and provide value for all stakeholders,” an Exxon Mobil spokeswoman said in emailed response to Reuters when asked to comment on Kua’s remarks.

The push to extract more benefits from the P’nyang project is part of a wider effort by PNG’s new government to reap more rewards from the country’s mineral and petroleum resources to lift the country out of poverty.

Kua said the government would begin working with foreign investors next year to review natural resource extraction laws, which mostly stem from before PNG won independence in 1975.

The country is already in the process of revising its Mining Act, and next year will look to update its petroleum legislation to match regulations in other nations that produce LNG.

“In early 2020 the government will look at such changes in our regulatory set-up in close consultation with our development partners,” Kua said at the conference.

“This consultation is necessary to ensure Papua New Guinea is walking forward in lock-step with its investors,” he said.

“Whilst attracting FDI (foreign direct investment) in the oil and gas sector, reaping and sharing the rewards involving this valuable resource must be equitable to our development partners, investors, and the host government and its people.”

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Papua LNG Talks In ‘Mexican Standoff’ As Govt Seeks New Gas Deal

Post Courier | August 21, 2019

The Papua LNG negotiations in Singapore have broken down into a ‘mexican standoff’ between two major oil conglomerates and the PNG government.

Talks centred on the Papua LNG agreement, signed early this year between developer Total of France and the PNG government. Hopes were high, there was an air of anticipation. But over the weekend in Singapore, the talks in Asia’s scenic garden city state never eventuated. Instead, details are all being hushed up although there is really nothing to hide as each camp retreated their home countries.

The PNG government delegation led by Petroleum Minister Kerenga Kua returned quietly, empty handed and in low spirits.

The government is seeking to re-adjust the agreement, which seeks, among others, more for landowners. Total executives have shied away from an official comment as they told the paper the statement will have to be sent back to France for approval from the hierarchy which will take a week.

ExxonMobil and Oil Search Limited, the other big two in Papua New Guinea remained zipped.

But insiders from Singapore say that the big French oiler Total and powerful US ‘conglomerate’ ExxonMobil refused to back down from demands already made public by the PNG government.

The oil and gas giants remain adamant that PNG government to respect the gas agreement signed this year. The insiders said that there was more at stake if the agreement was aborted and so much money already wasted. They also told the Post-Courier from Singapore that whatever the outcome, the players were ready to take the matter to court.

“The PNG government must respect the agreement that was signed and there’s so much at stake if the deal is aborted. Of course the company stands to lose but the biggest losers will be the State,” the insider said.

“The players spent billions of US dollars to get to where they are right now.

“What if they sue the State and ask for all the monies to be reimbursed? I mean you not looking at millions, you looking at billions.”

Gulf Governor Chris Haiveta, who is leaning towards the developers, is in Australia for the investment conference in Sydney. He is also not talking to the media yet.

Mr Kua is back in Moresby, his return, quiet and unheralded. He said late last week before heading to Singapore that the deal for the Papua LNG project could be modified if a government review found its terms unfavorable.

But early this week, he cautioned that considering what was at stake, the people’s expectations must be guarded during this period.

“The negotiations could work out well or even disastrously, but either way, the people must be ready to accept whatever outcome.”

Yesterday the PNG government was contacted but the paper was advised an official statement will be released by before end of the week.

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$14bn PNG LNG expansion hangs by a thread

Esmarie Iannucci | Mining Weekly | 15 August 2019

The share price of ASX-listed Oil Search stumbled on Thursday after the government of Papua New Guinea (PNG) sent a delegation to Singapore seeking to renegotiate the terms of the PNG liquefied natural gas (LNG) agreement, signed in April this year.

Minister for Petroleum Kerenga Kua said on Thursday that the agreement was signed by the previous PNG government, in a period when “serious moves” were being made to remove and replace said government.

He added that the new government took office in May with a firm view that the PNG gas agreement was disadvantageous to the state, and was seeking to renegotiate the deal.

Kua warned that the negotiations could work out “disastrously” but said that the people of PNG had to be ready to accept the outcome.

The efforts to renegotiate the PNG LNG agreement come despite the PNG government’s earlier assurances that it would, in principle, stand behind the signed agreements in the best interest of the State.

At the time, however, the government reserved the right to discuss “a shortlist of matters” with the project proponents.

Oil Search MD Peter Botten on Thursday said that the company was looking forward to gaining further clarity on the PNG government’s position regarding the agreement, which was inked in April this year, and the ways forward for the project.

The April agreement between the PNG government, Oil Search and ExxonMobil, and operator Total SA defined the fiscal framework for the PNG LNG project, and included a domestic market obligation, a deferred payment mechanism for the State’s payment of past costs, and a national content clause to support local workforce development and the involvement of local businesses.

The agreement gave the project proponents the confidence to start the initial work on a $14-billion plan to double the expansion of LNG in PNG to around 16-million tonnes a year.

The expansion plans include three new 2.7-million-tonne-a-year trains at the PNG LNG project, two of which will be operated by Total on its own acreage, while the third will be operated by ExxonMobil and fed from its existing and new gasfield P’nyang.

A final investment decision on the expansion is targeted for 2020. 

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Papua New Guinea sends team to Singapore to renegotiate Total LNG deal

Sonali Paul | Reuters | 15 August 2019

Papua New Guinea has sent a team to Singapore to renegotiate its Papua LNG agreement with French oil major Total SA, the nation’s petroleum minister said in a statement on Thursday, warning the talks could end “disastrously” for the gas project.

The strong language from minister Kerenga Kua marked an about-turn from a statement 10 days earlier, when he announced the new government would stand by the gas deal agreed by the previous government with Total in April, with some minor changes.

The state negotiating team, which includes Kua, left on Thursday for Singapore and will return early next week, the minister said in a statement released by his office.

“The negotiations could work out well or even disastrously,” he said.

Papua LNG, a joint venture between Total, Exxon Mobil Corp and Australia’s Oil Search Ltd, is part of a $13 billion plan set to double the country’s exports of liquefied natural gas (LNG).

The Papua LNG gas agreement, key to the project going ahead, came under review when Prime Minister James Marape came to power in May promising to reap more benefits for the impoverished nation from its huge oil, gas and mineral resources.

“Success in the discussions could lead to an early progress of the project. By the same token failure could have very serious ramifications,” Kua said.

“This is a risk we take as we try to move in the direction of taking PNG back and making it wealthy.”

Total declined to comment ahead of the talks, but its Chief Executive Patrick Pouyanne said on July 25 that he expected the government to respect the gas agreement.

Oil Search said on Thursday it looked forward to “further clarity on the state’s position” on the agreement and ways to advance the project.

The government has said it wants to sort out Papua LNG before resuming talks on another gas deal, governing the Exxon-led P’nyang field, which will also feed the $13 billion expansion of LNG exports.

Oil Search is a partner in both Papua LNG and P’nyang.

The renewed uncertainty around the status of the Papua LNG agreement and potential for further delays on the P’nyang deal knocked Oil Search’s shares down 6.7% on Thursday.

“We remain of the view that we can’t rule out a tougher approach to the Papua gas agreement being taken by the new government, which would present risk of material delay,” Credit Suisse analyst Saul Kavonic said in a note.

Analysts have warned that delays on sealing the agreements and any changes to terms could see the gas projects put on the backburner as Total and Exxon may then look to pursue other LNG projects elsewhere in their global portfolios.

Exxon Mobil in PNG was not immediately available for comment.

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PNG gas project teething issues normal, says minister

Dateline Pacific | Radio New Zealand | 1 August 2019

A landowner threat to shut down a major gas project in Papua New Guinea has been averted for the time being.

On Wednesday Baimuru landowners in Gulf province announced they would shut down the $US13-billion Papua LNG gas project in their district.

They were unhappy with the developer, French company Total, over issues around landowner company contracts in the project.

The Minister of Petroleum and Energy Kerenga Kua told Johnny Blades that these were merely teething issues in the project, and talks between stakeholders have resolved the issue for now.

Kerenga Kua: It’s a new project and people trying to get to understand each other. So, misunderstandings can arise and also temperaments can be affected. So, these are merely teething issues. And I think it’s been substantially resolved already by a meeting last night, between Total, the department and landowners last night. So it’s by the by, by now.

Johnny Blades: There was a grievance expressed by these landowners over the non-renewal of contracts for some of the companies or entities in work associated with this fledgling project. So are you saying that they’re back on deck, or at least Total have agreed to look at this again?

KK: Well, it’s important always for people to talk between themselves and… I must express my concern that the landowners resorted to the extreme course of action available to them pretty quickly, without firstly exhausting all avenues of talking with Total. As leaders of that community, they needed to be wary of the words they use and the actions they take, because the project is going to be there for the long term and everybody will benefit out of it, and the first line of people  to benefit from that will be the local people themselves. For that reason they needed to develop a culture of tolerance and dialogue, so resorting to threats in terms of shutting down and talking about a Bougainville-type issue and all this is very unhealthy.  Total have made some decisions, those are business decisions that have to be made during the preparatory stages because the actual determination of who the landowners are is a process that would have to take place in accordance with the Oil and Gas Act. At this stage my message to everybody is this: we need to understand that there is a very clear difference between being a landowner in fact and being a landowner in law for the purposes of the Oil and Gas Act. Now, the landowners themselves know as a matter of faith who the landowners are, they themselves know it, and they organise themselves into groups and try to get spin-off businesses, etc. However, for the purpose of being determined landowner for the purposes of Oil and Gas Act, there’s a process that must be completed, and that process is still ongoing.

JB: And that will be sorted in due course?

KK: In due course, when I sign off on what they call the landowner determination, then that becomes the  landowners in law and in fact, for the purposes of Oil and Gas benefits flow.

JB: Because of the example of the first big LNG project up in the Highlands, do you think these Gulf province communities, landowner communities, have good reason to worry? You know, they’ve seen how the Hela and Southern Highlands communities have not had the benefits that were promised them, and perhaps that’s why they’re concerned, so they’re just trying to get things moving?

KK: Yeah, from the outside, it’s difficult to see what things the landowners have received and what things they have not received. And I had the same issue before I was Minister for Petroleum. But what I have seen now coming in is that the scenario is this: the state is substantially up to date in honouring its commitments. And I thought differently, I thought completely differently. And I used to push that barrel on behalf of the landowners before. And I still do in the residual areas that remain to be attended to. But what I’ve noticed is that the state and the developers in particular substantially complied with their obligations to pass the benefits on to the landowners. Where the issues are, are where, for example, the landowners themselves have differences amongst themselves, then they take the matter to court and the court then issues that an injunction to freeze disbursement of entitlements to the landowner until those court proceedings completed. That’s one area.

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Total’s PNG Gas Plan Faces Fresh Test as Deal Changes Proposed

Logo at French oil and gas company Total gas station in Marseille, February 11, 2015. REUTERS/Jean-Paul Pelissier

Stephen Stapczynski | Bloomberg | July 26, 2019

Papua New Guinea’s petroleum minister said he’s completed his review of a recent natural gas agreement with Total SA and will recommend changes, creating a potential hurdle for the delayed $13 billion effort to double the nation’s exports of the fuel.

The potential changes cover both regulatory and commercial terms of the so-called Papua LNG agreement and must be approved by the National Executive Council before submitting them to venture partners, which include Exxon Mobil Corp. and Oil Search Ltd., Kerenga Kua said in an interview Thursday.

Kua said he’ll send his findings as soon as Monday to the council, a top policy making body, and expects a revised agreement with the companies completed within six weeks. In response, Total’s Chief Executive Officer Patrick Pouyanne pushed back against any potential overhaul.

“All issues are capable of discussion and compromise,” Kua said. “Even though we may have our wish list and they may have their wish list, finding the middle ground where all of us can benefit is an important principle.”

Oil Search shares added 0.6% to A$7.09 as of 10:43 a.m. in Sydney and are headed for a 6.3% rise this week. The Australia-based producer declined to comment. Exxon didn’t respond to requests for comment.

“We are confident that it’s in the best interest of PNG to respect the agreement that has been signed in order to move forward with the project,” Pouyanne said on a conference call Thursday. “We expect the new government to respect” the deal signed by its predecessor, and Total has “many” LNG projects in its portfolio.

Political Flash-Point

Separately, Newcrest Mining Ltd., Australia’s top gold producer, and Harmony Gold Mining Co. said they are facing a hurdle with the development of the $5.4 billion Wafi-Golpu gold-copper project in PNG amid heightened political uncertainty. The delay in permitting is associated in part with legal proceedings between national and provincial authorities and the PNG government continues to signal support for the project, Newcrest said in a statement Thursday.

Liquefied natural gas exports have developed into a political flash-point for the country as its existing venture, the Exxon-led PNG LNG project, has been criticized as not benefiting the domestic economy as much as expected. The nation’s new prime minister, James Marape, swept to power in May amid a wave of criticism of the Papua LNG deal signed by his predecessor. He tasked Kua with reviewing the agreement after appointing him petroleum minister in June.

“For too long we have allowed external forces to dictate the direction we take,” Marape said Thursday at the Lowy Institute in Sydney. The government must work with its partners “to ensure a fair and equitable distribution of our resources.”

In the interview, Kua described the suggested changes as a “short list,” but declined to provide specifics. He said he’s been in communication with the partner companies.

“We haven’t rejected the signed agreement,” he said.

The review has delayed plans to double gas exports from Papua New Guinea, which involves a $13 billion expansion across separate but interlinked projects. Talks on the second gas agreement, for the Exxon-led P’nyang venture, won’t begin until the Papua LNG deal is revised, Kua said.

Oil Search said last week that it expects front-end engineering and design work on new LNG production units to be pushed back pending those agreements. That may move a final investment decision until as late as 2021, which puts the expansion projects at risk of greater competition for building resources and customers, according to analysts at Sanford C. Bernstein.

Marape said his government assembled a group of advisers to assess the country’s resource laws to find the right balance between encouraging foreign investment and boosting local involvement in the sector.

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