Tag Archives: Total

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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Petroleum Dept lacks ‘expertise’

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

Luke Kama | The National aka The Loggers Times | August 9, 2019

THE Department of Petroleum and Energy (DPE) has a shortfall in technical expertise that needed to be addressed by the Government through recruiting competent and qualified personnel from the open market, an expert says.

Johannes Kaman, a national resource economist who has worked around the world on various oil and gas and mining projects, told The National yesterday that PNG was a country rich with oil, gas and minerals but needed the best technical advice to get the most out of those resources, and that advice had to come from the DPE.

“Oil and gas and the mineral sector is a very technical sector that needs the best people with the required skills, knowledge and expertise in those fields to carry out the task on behalf of the State and negotiate with developers,” he said.

Kaman said the failure in addressing the outstanding landowner issues and benefits sharing matrix concerning the PNG LNG and the failure in securing a better Papua LNG deal was a result of poor technical expertise in the department.

“The government needs to enquire about why the senior positions of the DPE which were advertised externally calling for applicants in the open market was withdrawn and the advertisements done again through an internal advertisement,” he said.

“The Government needs to find out why that was the case because people in all the senior positions in the DPE are acting on the positions.

“And some of them are not qualified and do not have the skills, knowledge and the technical expertise to be there.”

Kaman said PNG needed to get a better deal from its resources and there was really an urgent need to review the technical expertise at DPE.

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How Exxon’s Big Gas Plan Stirred Up Papua New Guinea

‘An International Monetary Fund analysis found Papua New Guinea received “quite limited benefits” because it granted Exxon generous rights to recover costs before paying taxes or fees’

Dan Murtaugh | Bloomberg | August 2, 2019

Papua New Guinea, the impoverished Pacific nation of 8 million people, is in a bind over a $13 billion project to double natural gas exports. Political opposition to the deal has already helped take down a prime minister, and some of the world’s biggest energy companies are anxiously waiting to see what the new government is going to do with it. The drama is playing out as a flood of capacity is about to hit the global market, meaning time for the investment may be running out.

1. What’s the project?

It’s actually two cooperating projects involving a bunch of companies. Together, they will deliver capacity to export 8 million tons a year of liquefied natural gas, roughly 3% of global capacity. That doesn’t sound like much, but it’s a huge deal for a country with per capita income under $3,000 a year.

2. Who’s involved?

Exxon Mobil Corp. and Oil Search Ltd. are leading a group that plans to expand the existing PNG LNG plant with a third LNG production unit, which will be fed primarily by the P’nyang gas field in the country’s highlands. Meanwhile, Total SA is heading another venture, called Papua LNG, which also has Exxon and Oil Search as partners and a plan for two LNG production units fed by the Elk-Antelope gas fields. The projects will save money by sharing some facilities.

3. What’s the hold-up?

Both projects need agreements with the government, which include details that determine how the country will benefit. Total secured such a deal in April with then-Prime Minister Peter O’Neill, but opposition party members complained it wasn’t good enough. Finance Minister James Marape quit and left O’Neill’s coalition in protest. In May, O’Neill resigned under pressure from legislators and Marape was chosen to replace him. Marape’s government is now reviewing the Total agreement and considering changes. Exxon’s deal is on hold until that process is complete.

4. Why so sensitive?

When Exxon first opened PNG LNG in 2014, it did so with the promise of transforming Papua New Guinea’s economy. (Total gross domestic product is about a 10th of Exxon’s annual revenue.) The government estimated it would bring it about 2 billion kina ($613 million) in extra revenue annually through 2021. Instead, the project’s partners paid less than a quarter of that (about 495 million kina) in taxes, royalties, dividends and other payments in 2016. Meanwhile difficulty in identifying landowners in the highlands has delayed payments promised to those affected by drilling and pipeline construction.

5. Why such small benefits?

An International Monetary Fund analysis found the country received “quite limited benefits” because it granted Exxon generous rights to recover costs before paying taxes or fees. For example, Exxon is able to subtract its operating costs, debt amortization and capital costs from its gas revenue before taxes and royalties are calculated.

6. What’s the backdrop?

Extractive industries are key to Papua New Guinea’s economy, comprising nearly 30% of the country’s gross domestic product and 85% of its exports. Disputes over how to split the revenue have long been a source of social unrest. In the 1980s, a civil war erupted in the island of Bougainville over what was then one of the world’s largest copper mines. As many as 20,000 people died in the fighting and the mine has been shut since 1989. The island’s residents are scheduled to vote in a referendum in October that could lead to independence.

7. What’s at stake?

For the energy giants, the impasse couldn’t come at a worse time. Assuming deals are struck, they’ll still need a year for preliminary engineering work before being ready to sign off on the $13 billion building cost. Meanwhile, they have more than $300 billion worth of LNG projects from Russia to the U.S. to Mozambique that will be vying for a limited number of potential customers. A lengthy delay could put the PNG expansion at the back of the line. While Marape says he doesn’t want his country to miss out on the investment and jobs (at one stage expected to be more than 20,000), he’s also committed to securing a larger return for his country from its natural resources.

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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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Landowners in PNG threaten to shutdown LNG gas project

French oil and gas company Total gas station. REUTERS/Jean-Paul Pelissier

Radio New Zealand | 31 July 2019

Landowners in Papua New Guinea’s Gulf province say they’ve begun an action to shut down the Papua LNG gas project.

Baimuru landowners are unhappy with the developer, French company Total, over non-renewal of landowner company contracts at the project site and other issues.

Baimuru is the location of the fledgling project’s gas wellheads, which landowners say they will block access to as part of their protest.

The Landowners are demanding the Department of Petroleum and Energy intervene as soon as possible to intervene.

They seek a recognition of their rights to engage in and benefit from spin-off benefits and contracts from the $US13 billion project.

The Landowners were expected to hold a press conference in Port Moresby on Wednesday afternoon to announce the shutdown and their demands.

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