Tag Archives: Kerenga Kua

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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Review of Papua LNG underway, says Kua

July 26, 2019

PETROLEUM Minister Kerenga Kua says the review of the Papua LNG agreement signed in April is underway.

“The signatories have been consulted and informed and we have asked for the government to be given time to review the agreement and its impact and that is already being undertaken,” Kua told The National yesterday.

“By next week, I expect that Cabinet will approve any areas of concern that the State wants to put up for reconsideration between the signatories to the contract to commence the process of discussion between themselves. It will be short and sharp and we will be able to have a final position very quickly, maybe in the next three weeks or so.”

Kua made the comments at a public seminar in Port Moresby yesterday hosted by the Institute of National Affairs (INA) themed: “Does the PNG government get its fair share from the resource sector?”

Asked on what the concerns of the government were in the agreement signed in April, he said: “I am not at liberty to raise that issue at the moment but it will be a short list.”

INA director Paul Barker told The National yesterday that: “It seems that the former government was very keen on pushing that through the deal and in a bit of a hurry and there were a lot of money spent on consultants coming in to give advice.

“Some people have said to me that if they just followed the law, then they could not have gone too far wrong, but instead they wanted to do special deals and special arrangements and it was the government pushing some of those special arrangements and if you do shortcuts and you rush things, invariably that creates problems for yourself in the longer term and as an investor.

“It is much better as an investor to make sure that everything down to the letter is done properly and I think in that case it was the previous government’s rush that caused the problem.”

The US$13 billion (K43 billion) Papua LNG project shares split: French energy company Total – 31.1 per cent, ExxonMobil – 28.3 per cent, Kumul Petroleum Holdings Ltd (state) – 20.5 per cent, Oil Search – 17.7 per cent, landowners – 2.0 per cent, and minor parties – 0.4 per cent.

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