The Waiting Game: Pasca A Gas Agreement still on hold

By: Marcelle P. Villegas November 21, 2021

In September 2017 Twinza spudded the Pasca A4(AD-1) well with an objective to complete appraisal of the Pasca A field and suspend the well as a future development well for the first offshore field development in PNG. The well not only confirmed the pre-drill expectations but exceeded them, proving that the field resource was more than sufficient to underpin an economic development. [Photo courtesy of Twinza Oil Limited]

Twinza Oil Limited’s Pasca A Gas Agreement is yet to be finalized as per their media release last August. Honorable Keregna Kua, Minister for Petroleum, announced in Parliament a seven-day period for the State Negotiating Team (SNT) and Twinza Oil Limited to meet to finalise drafting of the Pasca A Gas Agreement. Unfortunately, the deadline expired on the 17th August without the SNT making themselves available to meet with Twinza. [1]

From Twinza’s media release last 24th August 2021, “This lack of engagement, with a Company which has invested over K350 million in PNG to date and confirmed Pasca A commerciality through drilling the A4 well, is disappointing. Twinza will continue to honour the deal struck on the 6th July and announced by the Prime Minister, the Hon. James Marape on the 13th July 2021.”

“As stated by Minister Kua on the 13th July, Twinza can again confirm that the Gas Agreement delivers all of the Government’s stated objectives from the project and would provide the highest State take of any resource development in PNG, over 60% of project value (55% nominal State take).”

“Twinza is continuing to seek clarity from the Minister for Petroleum, who is responsible for closing-out the routine drafting review, when there will be support for continued foreign direct investment on Pasca, and that the State will honour the deal of the 6th July 2021. The Gas Agreement has been ready for signing since this date.”

The company’s former CEO and Chairman, Ian Munro said, “Despite the Twinza team being on standby 24/7, and the clear instructions from the Minister for both sides to meet within the specified 7 days, the SNT has not made themselves available even once for a final page-turn of the agreement.”

“Twinza remains hopeful that both parties can honour the terms and agreement of the 6th July 2021 and that we can move immediately in to the FEED phase of the project. The Company has a history of delivering in PNG: successfully drilling an appraisal well on the Pasca field, being awarded a life-of-project environmental permit and now agreeing fiscal terms which deliver the highest State take of any resource project in PNG. With a supportive Government, we look forward to delivering PNG’s first offshore oil and gas production in 2025.” [1]

With the current hurdles and delays in the approval, what is the current status of the project?

PNG Business News recently interviewed Roppe Uyassi, Twinza Oil Limited Country Manager for Papua New Guinea. He stated, “Twinza Chairman, Stephen Quantrill, has been in PNG for five weeks between October and November engaging with Government and various stakeholders as we look to constructively work together with the State to finalise the Pasca A Gas Agreement and bring it to a conclusion in the near term.”

Roppe Uyassi, Twinza Oil Limited Country Manager for Papua New Guinea

Going back in July 2020 when discussions on the Gas Agreement started, Uyassi mentioned, “The Company is committed to working collaboratively with the Government to deliver an agreement that allows the Project to move forward toward development, whilst providing a higher State take than previous projects. Once the Pasca A Gas Agreement and the Petroleum Development License are in place, the Project is well positioned to enter the Front End Engineering and Design phase later this year.”

Since last year, several events took place on the road to finalise the Pasca A Gas Agreement, which at this point is still pending. One of the most notable incident was last 16 April 2021 when the PNG Government informed Twinza about their increased demand from the Pasca A Gas Agreement.

The change entails that the Government requires a 6% Production Levy in order to sign the agreement. This is now 4% more than the Production Levy that was agreed as part of the comprehensive terms for Pasca A, negotiated by the State Negotiating Team and announced by the Prime Minister, Honorable James Marape as of Sept. 24, 2020.  "The additional levy which has been requested would make the Pasca A Project unfinanceable for any investor," from the media release of Twinza on their website. [2]

The changes in the agreement were formally announced by the Petroleum Minister through a letter dated 4 Feb. 2021. The letter indicates the Government's demand to raise fiscal take to 55% to 60% nominal share. This value is actually 75% to 85% of the actual project value, which would make Pasca A unviable for investors and financiers alike.

From the company’s media release last April, they stated, “In expectation that the Gas Agreement would be signed by year-end 2020 after the Agreed Terms were announced in September by the Prime Minister, Twinza has maintained its Project team for FEED-readiness. The signing of the Pasca A Gas Agreement this month would have allowed the Project to immediately move into the Front-End Engineering and Design phase, with a final investment decision in 2022 and first production in 2025. Given the continued delays, Twinza will now stand-down the Pasca Project team until there is clarity on terms and execution of the Gas Agreement.”

Former CEO Munro expressed his dismay for the changes in the agreement. He said, “Twinza was awarded the Pasca license nearly 10 years ago as a foreign direct investor and since this time the Company has spent more than K350 million in developing a field that was discovered over 50 years ago and passed over by other industry players.”

“It is disappointing that at the closing stages of a drawnout 10-month Gas Agreement process, the State is now seeking to again revise terms to ones that are demonstrably unacceptable to any investor. Consequently, whilst Twinza remains committed to progressing the Pasca A Project on a fair and equitable basis, the Company will streamline its costs whilst awaiting a Gas Agreement signing on acceptable terms. We remain focused on developing PNG’s first offshore oil and gas field and opening up the Gulf of Papua to much-needed investment as soon as circumstances allow.”

As of June 2021, he further said, “The Company remains committed to delivering Pasca A, PNG's first offshore oil and gas project. However, it appears the 12-month long process may be stalled yet again because the State has not communicated to Twinza the agreement terms which would be acceptable. It is time to bring this matter to a conclusion such that the Project can move forward and Twinza is on standby to execute the agreement on the Petroleum Minister’s desk”. [3]

The following month in a media conference, there were promising results when the Papua New Guinea’s Prime Minister, Honorable James Marape, announced that the negotiations for the Gas Agreement had been successfully concluded on the 6th of July 2021. The media conference to announce the good news took place on 13th of July 2021. However, they were faced with further delays when the expected July 29th signing did not push through.

And then after a month, Twinza reported that the PNG State is not honouring terms in Pasca A Gas Agreement which were announced by the Prime Minister last 13 July 2021.

From Twinza’s media release, “The PNG Government and Twinza agreed final terms on the 6th July 2021 for the Pasca A Gas Agreement, which were reflected in an agreement that both parties committed to use. Subsequently, the Prime Minister, the Hon. James Marape announced on the 13th July 2021 that negotiations had concluded, with a scheduled initialling of the agreement on the 19th July and signing on the 29th July 2021.”

“After a month of silence on the State-side, the SNT Chairman returned an extensive mark-up of the agreement late on the 6th August. This document bears no resemblance to the agreement of the 6th July 2021, containing over 2,400 changes in only 76 pages, and is essentially a new agreement which was provided ‘with endorsement of SNT, State Solicitor and Minister Kua’. The agreement would be unacceptable to any investor and introduces new fiscal terms and inexplicable new conditions, several associated with Kumul Petroleum, that would make the Pasca A Project, or indeed any project in PNG, non-commercial and unfinanceable. Twinza can provide a copy of the State’s new agreement on our website to ensure full industry transparency.”

Finally, to conclude, “For reasons unknown to Twinza, it would appear that the Prime Minister’s strong support for the Pasca A Project, expressed most recently at the media conference of the 13th July 2021, is not being actioned by the State Solicitor and is being openly undermined by elements within the SNT.” [4]

Despite all these obstacles, Twinza Oil Limited remains hopeful to successfully launch in the near future PNG’s first offshore oil and gas production. (--Marcelle P. Villegas for PNG Business News)



[1] Twinza Oil Limited media release (24 August 2021). "Pasca A Gas Agreement Yet To Be Finalised Despite Instructions From The Minister For Petroleum".

[2] Twinza Oil Limited media release (19 April 2021). "PNG Government Changing Terms Ahead of Pasca A Gas Agreement Signing"

[3] Twinza Oil Limited media release. (2 June 2021). "Twinza Awaiting Response from Petroleum Minister".

[4] Twinza Oil Limited media release (9 August 2021). "PNG State Not Honouring Terms in Pasca A Gas Agreement which were Announced by Prime Minister 13th July 2021".

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