Tag Archives: Total

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 New Guinea sticks to gas deal with Total for $13 billion project

GOVERNMENT SURRENDERS

Sonali Paul | Reuters | September 3, 2019

Papua New Guinea said on Tuesday it will honor a gas deal that Total SA signed with a previous government for a $13 billion plan to expand gas exports, after securing minor concessions from the French company.

The decision removes uncertainty over the plan to double liquefied natural gas (LNG) exports from the Pacific nation that arose after new Prime Minister James Marape came to power in May promising to win more benefits for the impoverished country.

The Papua LNG gas agreement is one of two agreements needed for Total and its partners, Exxon Mobil Corp and Oil Search Ltd, to go ahead with the LNG expansion plan.

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

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

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 party wanting access to the project’s petroleum pipelines.

It would also be willing to negotiate for Papua New Guinea to take a stake in the pipelines after the state has repaid all its loans and costs on the 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,” Kua said.

The companies had insisted that the Papua LNG gas agreement that Total signed in April should be honored, and Oil Search warned in August that costs on the project could rise if it was delayed by prolonged talks.

An analyst said the government had capitulated to Total, winning only non-committal offers to consider future steps that might benefit the country.

“This is a big win for the industry, but they can’t say that, because they need to let the prime minister and Kua save a little political face,” said the analyst, who declined to be named due to the sensitivity of the issue.

The three companies welcomed the government’s decision.

“We are looking forward to working with the Government of PNG to conclude the required gas agreement for the P’nyang project,” Exxon Mobil said in an emailed comment, referring to the second of the two agreements needed.

Oil Search’s Managing Director Peter Botten said the project would “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,” referring to the PNG currency.

Shares in Oil Search, which have dropped over the past three months amid uncertainty over the gas agreements, closed 2.1% higher shortly after the government’s announcement in a flat broader market.

“There should be a handsome re-rating,” Adrian Prendergast, an analyst at Morgans, said a day ahead of the announcement.

“In the time the political developments have been happening it (Oil Search) has really derated more than the total value that we place on this expansion.”

At Monday’s close, Oil Search shares were down about 14 percent since the previous prime minster stepped down.

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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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Oil Search on tenterhooks over Total’s Papua New Guinea gas deal

Is PNG exacting payback on Oil Search for the UBS loan debacle?

Sonali Paul | Reuters | August 20, 2019

Oil Search warned on Tuesday that costs for a $13 billion plan to double gas exports from Papua New Guinea could rise if talks on a gas agreement between the government and Total SA drag on beyond next week.

Australia-listed Oil Search is a partner in Total’s Papua LNG project and Exxon Mobil Corp’s  PNG LNG project, which together aim to double LNG exports from the impoverished Pacific nation to around 16 million tonnes a year.

PNG’s new petroleum minister, Kerenga Kua, last week suddenly set out to renegotiate a gas deal with Total, which the company had signed in April with the previous government. Neither side has commented on the talks held last week in Singapore.

Oil Search Managing Director Peter Botten said on Tuesday further talks are planned this week and next week, with the aim of reaching an agreement by the end of August.

“It’s a dynamic environment at the moment,” said Botten, who was in Singapore during the talks, adding that he had been fully briefed on them.

He declined to comment on what issues have yet to be resolved or say how confident he was a deal would be done by the end of next week.

“I’m not going to put odds on it,” Botten told Reuters in an interview.

“We’re doing whatever we can to work with whoever we can to try and get this resolved as quickly as possible. Time is running out though.”

Botten has led Oil Search, PNG’s biggest company, for 26 years and has faced delays on projects before, but said the current uncertainty was rare in a country that has had a “very stable fiscal regime” for many years.

“It’s unusual that this is happening at such a critical time in the project.”

The Papua LNG project had already lined up bids from contractors to do preliminary engineering and design work, but those are due to expire in September, he said.

The companies risk having to pull together new bids if the existing bids fall over, and could face higher costs.

“It would be done in a market that probably would have a higher level of expenditure as the capacity in the market gets soaked up by new projects in other parts of the world,” Botten said.

Oil Search on Tuesday reported its half-year profit more than doubled to $161.9 million for the six months ended June 30 from a year earlier, just ahead of a consensus estimate of $160 million, on strong output from the PNG LNG project and higher oil-linked LNG prices.

The result last year was hurt by a shut down of PNG LNG following a major earthquake.

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PNG aims to retain 30% of exported gold, may change currency pegs

Jonathan Barrett | Reuters | 19 August 2019

Papua New Guinea wants to retain at least 30% of the gold it currently exports as it transforms its economy under a new government leadership, the country’s commerce minister said on Monday.

PNG was the world’s 14th largest gold producer in 2018, according to the World Gold Council. Its assets include the Porgera gold mine, majority controlled by a joint venture between Barrick Gold Corp and Zijin Mining Group , which has a lease currently up for renewal.

PNG’s Minister for Commerce and Industry Wera Mori told an investor forum in Sydney that the resources-rich nation was developing policies to keep more of the commodities it produces in the country to improve its economy.

“We are in the process of developing the framework to retain at least 30% of our gold that we export every year,” Mori told an investment forum in Sydney.

Mori said that PNG would also consider pegging its currency, the kina, to gold, rather than the U.S. dollar.

PNG’s central bank currently fixes its currency to a narrow U.S. dollar band, propping up the kina’s value while creating a shortage of dollars available in the Pacific nation.

James Marape, the former finance minister who became PNG’s new leader in May after winning a vote in parliament, has put some of the world’s biggest resources companies on notice over a perceived lack of wealth flowing from their projects back to communities.

This includes sending a team to renegotiate its Papua LNG agreement with French oil major Total SA.

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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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