Pasca A Project now Expected to Start in 2025
by PNG Business News - May 07, 2021
The Pasca A offshore oil and gas project in Gulf faces further delay to its start-up which is now expected in 2025, says developer Twinza Oil Ltd.
The project will continue to be postponed until a deal is signed, according to Roppe Uyassi, who added that the project's delay would likely be compounded by the project team's departure.
“This is really unfortunate for PNG, following the lengthy delays we have already seen from resource projects in PNG such as Papua LNG and Wafi-Golpu,” Uyassi said.
Only prior to signing the deal last month, the government made it clear that it wanted a 6% export tax before it could sign it.
According to the developer, it was 4% more than what had been settled upon previously.
While the window for negotiations was still open, Petroleum Minister Kerenga Kua said it was critical to secure the best offer for the region.
Oil and gas discovery and production, according to Uyassi, is a "highly dangerous but potentially lucrative market."
“There needs to be a balance that recognises the risk taken by private investors and the development goals and aspirations of PNG, and the best deal would be one that maximises revenues to PNG,” he said.
“This could be in the form of payments to local businesses and employees, or taxes and royalties to the Government to fund the country’s development priorities in health, education, security, infrastructure etc.
“Importantly, it must also provide an incentive for private investors from all over the world to provide their money to develop the Pasca A Project on the promise of profits that will reward them for taking the risk to invest in Papua New Guinea.
“We firmly believe that the deal agreed to between the State and Twinza strikes the right balance and provides a win-win outcome for both parties, delivering the highest State take of any resource development in PNG, be it on a discounted or nominal project value going to the State.
“We understand that the outcomes of over 65 per cent discounted and 52 per cent nominal State take were even verified and benchmarked independently by Deloitte after being consulted by the State.
“The agreed terms also included domestic market obligation (DMO) for the supply of gas being provided from the first year of production for the first time in PNG’s history, plus an increased percentage of domestic market gas supply to 10 per cent of production.”
According to Uyassi, the Pasca Project would need at least K5 billion in additional funding in the coming years.
“Even the State nominee carrying the State’s 22.5 per cent equity on the project going forward would require project financing to move this project forward into production, meaning that whatever terms we agree with the State must also be viable for the State nominee to raise financing.
“The worst-case scenario would see Twinza sign an unviable gas agreement deal, only for the project to fail as it can’t attract investment from financiers who are more conservative than oil and gas project proponents such as Twinza.”
Twinza had already started standing down the Pasca Project team due to the continuing delays in signing the deal, according to Uyassi, as the timetable of the gas agreement's implementation remained unclear.
“This will continue, however, I will point out that as a foreign investor, Twinza has invested more than K350 million in the Pasca field over the past 11 years and will remain committed to PNG long-term,” he said.
“The Pasca Project is ready to move into the Feed phase of project development soon after a successful gas agreement signing.”
According to Uyassi, the project has been on hold since 2020, pending the start of the Feed process.
“We remain hopeful that the development of PNG’s first offshore oil and gas field will commence soon,” he said.
“We are committed to Papua New Guinea and remain hopeful this is something PNG will have to address for the long-term good of the industry and the many local businesses that depend on the industry.”
PNG Business News - June 01, 2021
Pasca A First Shipment Expected in 2025
According to Petroleum Minister Kerenga Kua, the first cargo of the liquefied petroleum gas (LPG) from the US$1.6 billion (K5.5 billion) Pasca A project in the Gulf is expected to start in 2025. It will be the country's first offshore extractive resource project with infrastructure, located 95 kilometres offshore in seas 93 meters deep in the Gulf of Papua. Pasca A, according to Kua, is a modest gas condensate project in terms of reserves. The offshore production facilities, on the other hand, have the ability to combine tiny pockets of stranded gas deposits in the Gulf of Papua. “The project will evolve in a two-phased development plan. “In Phase One, rich liquids will be stripped and produced, namely liquid petroleum gas (LPG) and condensate while gas is re-injected. “In Phase Two, gas will be produced.” Phase One is estimated to take two years to complete and generate between 32 and 38 million barrels of LPG and condensates. In the third year of the project's manufacturing life, Phase Two will commence. During the project's ten-year lifespan, an estimated 330 to 400 billion cubic feet of gas (BCF) would be generated. Twinza Oil (PNG) Ltd, the operator, is concentrating on commercializing its "found but underdeveloped assets." Twinza Oil Ltd has a business relationship with Baker Hughes General Electric (BIIGE), which offers vendor finance for the company's drilling projects. Kua said in a statement that negotiations on the project began during the application stage for a petroleum development license in 2018. In 2020, the Cabinet established the State Negotiating Team (SNT) for the Pasca A project to negotiate a fair agreement for the state. “Last September, the Pasca A SNT and Twinza Oil Ltd initiated the term sheet for a Gas Agreement,” Kua said. “However, there were some misunderstandings on the financial analysis method used and the domicile status of the company. “These have been resolved through the SNT negotiations and offline discussions with Twinza. “In negotiating resource projects deals for the country, the State has taken an approach to tax from production rather than profits. “The Pasca A SNT has so far negotiated the production levy from the base case of 2 per cent (equal to Papua LNG Gas Agreement) from the Loloata initialled term sheet of last September, up to 4 per cent in April. “At a 5 per cent production levy that State would have reached 55 per cent state take on nominal cash flow analysis, which is what we want to achieve.”
PNG Business News - June 23, 2021
Twinza Oil Optimistic about Pasca A Project
Photo Credit: Twinza Oil Limited Twinza Oil is optimistic about the planned Pasca project's conditions. Roppe Uyassi, the country manager, stated that the terms had satisfied the required Government take, which was validated by Deloitte. Prime Minister James Marape wants the project deal finalized this month as well. Twinza is optimistic about the country's project “Unfortunately, for all stakeholders, we have not made much progress,” Uyassi said. “We are still waiting for the Minister of Petroleum to communicate to us whether the terms agreed with the State negotiation team have been accepted. “The terms outlined recently are acceptable especially given we have achieved the State take outcomes desired by the State as confirmed by the Deloitte report commissioned by the minister himself. “Hopefully, the terms Twinza has on the table (are) acknowledged so that we can sign the gas agreement and get on with developing Papua New Guinea’s first offshore oil and gas development.” The conclusion of the Pasca A gas deal, according to an earlier corporate statement, would allow the project to continue into the front-end engineering and design (Feed) phase, with a final investment decision in late 2022 and first production in 2025. The company stated that the delay in finalizing the gas deal would have an impact on the project timetable, defer investment, and cause production to be pushed back to 2026. Reference: The National (18 June 2021). “Twinza hopeful about project”.
PNG Business News - April 22, 2021
Government Increases Its Demand for Pasca A Deal
According to project operator Twinza Oil Ltd, the government has raised its demand for the Pasca A Gas agreement once again, ahead of the scheduled signing. According to a statement from Twinza, the government told the firm last Friday that signing the agreement now demanded a 6% production levy. It read: “This is 4 per cent higher than the production levy that was agreed as part of the comprehensive terms (agreed terms) for Pasca A, negotiated by the state negotiating team and announced by the Prime Minister James Marape last Sept 24. “The additional levy requested would make the Pasca A project un-financeable for any investor. “The agreed terms would have delivered the highest State take from any resource development in PNG and were widely regarded as meeting all of the demands of the State, including early revenues, full royalty and development levy entitlement and a domestic market obligation of 5 to 10 per cent while satisfying the requirements of project financiers.” it said that the State had also attempted to amend the negotiated terms through a letter from Petroleum Minister Kerenga Kua on February 4. “The Government’s demand to raise the fiscal take to (between) 55 and 60 per cent nominal share, which is 75 to 85 per cent of the actual project value, would make Pasca A unviable for investors and financiers alike,” it said. “Notwithstanding the changing State positions, Twinza remains committed to PNG and progressing the Pasca A Project on the agreed terms.” Twinza gave an extra concession to the negotiated terms, raising the production levy to 4%, with a further rise to 6% at higher oil prices, in an attempt to close the deal. “This will provide 65 to 70 per cent of project value to the State or 52 to 54 per cent of nominal take,” it said. “The State take has been independently verified by Deloitte in a comprehensive report commissioned by the Department of Petroleum and delivered to the minister this month.” Twinza has kept its project team for Feed (front-end engineering and design) – readiness in the hope that the gas deal will be concluded by the end of 2020 after the negotiated terms were confirmed by Marape in September. The Pasca A gas agreement reached this month would have required the project to enter the Feed process right away, with a final investment decision expected 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.” Chairman and chief executive Ian Munro said: “Twinza was awarded the Pasca license nearly 10 years ago as a foreign direct investor. Since then, the firm has invested over K350 million in cultivating a field that was discovered more than 50 years ago but overlooked by other industry players. “It is disappointing that at the closing stages of a drawn-out 10-month gas agreement process, the State is now seeking to again revise terms to ones that are demonstrably unacceptable to any investor. “Consequently, while Twinza remains committed to progressing the Pasca A project on a fair and equitable basis, the company will streamline its costs while 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.”
PNG Business News - November 28, 2022
Port Moresby Chamber of Commerce and Industry holds 67th Annual General Meeting
The Port Moresby Chamber of Commerce and Industry (POM CCI) held its 67th Annual General Meeting at the Lamana Hotel on the 24th of November 2022 , present to witness the occasion were its members, executives and various stakeholders. The meeting was officially opened by the President and Master of Ceremony Mr. Rio Fiocco who gave his opening remarks and report. He thanked all the POM CCI staff for their hard work this year despite the challenges faced by covid and other changes in the administration. Some of their achievements highlighted included the recruitment of two graduate accountants from the IBS University and the employment of its new membership officer. Mr. Rio Fiocco stated that by 2023 the chamber will be working with Total PNG to pre-qualify its members to be contracted to early works stage of the Papua LNG project . "All members who have issues affecting their business can feel free to come and see us so we can lobby for you through NCD or if it government related we will also lobby for you through the PNG Chamber of Commerce and Industry", said Mr. Rio Fiocco. The treasurer of POM CCI Ms. Akae Beach presented the chambers Financial Report stating that it had made a net surplus of k114,020 which is a 12% net profit margin despite not recouping most of its membership fees. "The Port Moresby Chamber of Commerce and Industry Inc is in good financial position and our net asset stand at K1.49m compared with K1.38m last year , a healthy increase of 8 %. Whilst conditions remain challenging , I am confident that the chamber will continue to be in overall surplus in 2022 as we continue maintaining our current strategy ( with an increase focus on both the Corporate and SME sectors) whilst continuous improvement in our financial systems, increase online and physical marketing efforts and increase member initiatives" stated Ms. Akea Beach. Ms. Akae Beach concluded that she will be leaving the chamber by the end of the year but will still support the chamber within her own capacity.
PNG Business News - November 27, 2022
PM Marape, Ministers and star international business speakers headline PNG Mining & Petroleum Conference in Sydney
Prime Minister Marape headlines a star line-up of speakers at the 16th PNG Mining and Petroleum Conference, in Sydney in December, to promote international investment in PNG. Already over 1000 attendees are registered to attend, as the Conference features a dynamic and engaging program centered around Prime Minister Marape’s announcement of 4 new mega projects and the expected re-opening of Porgera gold mine. Prime Minister Marape will be providing the keynote opening address on Day 1. He will be joined by Australian International Development Minister Pat Conroy. Senior executives of the major international investors in PNG, including Newcrest CEO Sandeep Biswas, Harmony Gold CFO Ms Boipelo Lekubo, TotalEnergies Senior Vice President Mr Julien Pouget, Santos President Upstream Mr Brett Darlie and ExxonMobil PNG Managing Director Mr Peter Larden will be providing a global outlook for their companies’ operations around the world, how they have adapted to emerging trends and how their PNG investments fit into their global portfolios. A highlight will be CEO of Fortescue Future Industries Dr Mark Hutchinson’s presentation of Fortescue’s vision for how green hydrogen can be a gamechanger for the world and PNG’s envisaged role supplying hydrogen to the world. Day 1 concludes with a session featuring former Australian Foreign Affairs Minister, the respected Julie Bishop, presenting her view as to why Australia needs to invest more in PNG, and PNG’s Trade and International Investment Minister Richard Maru outlining the PNG government’s vision for investment and development in non-mining sectors. Each session on Day 1 will feature panels moderated by well-known Australian media personality Ms Ticky Fullerton. Day 2 of the Conference features policy statements by Mining Minister Ano Pala and Petroleum and Energy Minister Kerenga Kua, presentations by Kumul Petroleum and MRDC, project updates on all of PNG’s existing mining and energy projects, and the presentations of the next wave of resource and energy projects – Papua LNG Project, Pnyang LNG Project, Pasca Gas Project and Wafi Gold-Copper Project. Day 3 of the Conference features a unique 3 stream format focused on varied themes including Exploration growth, Climate Change & Energy, Improving Ease of Business, Infrastructure, and Business Success stories. Day 3’s program features a significant list of speakers including heads of government regulatory agencies, CEOs of various PNG and international businesses, and includes international institutions such as the IFC. The Conference concludes with a session that focuses on PNG success stories where resource revenues have been invested for future benefit, and a presentation on the importance of the PNG Sovereign Wealth Fund. “It’s an engaging and dynamic Conference program with a high-profile cast of speakers. I am very grateful for the support that the Prime Minister has provided to the Conference, and the unprecedented participation of Government Ministers and heads of departments and agencies as speakers. Industry and the PNG Government are presenting a united front in promoting PNG as an international investment destination at the Conference. We are pleased that we can work with the Government in this regard. The Prime Minister will be in a unique position in our history by speaking about the advancement of 4 major projects, and the potential doubling of PNG’s GDP in the near future, which can usher in significant economic benefits for our people.” Said Mr Anthony Smaré, President of the Chamber of Mines & Petroleum. “We are also very fortunate that so many high-profile leaders from some of the world’s largest companies have taken time out to come and speak at the Conference to outline why they believe PNG is an important place to invest in. Australian Minister Pat Conroy’s speech will give us an indication of Australia’s view of PNG’s importance. I am personally looking forward to the afternoon session on Day 1 when Julie Bishop will present her view as to why Australia needs to invest more in PNG, and Minister Richard Maru will challenge international companies and countries to invest more into the PNG Government’s investment priority areas such as infrastructure and agriculture.” “Over 1000 people are now registered to attend the Conference, but there is still some seats left, so I encourage business people not already registered, to quickly secure their seats at www.pngconference.com over the next few days. The Conference is unique because you can meet everyone who has a role in PNG’s resources and energy sector - Government policy makers and regulators, the business movers and shakers, landowners, financiers, investors, suppliers and contractors from all over the world – all in one place over three days from 5 to 7 December 2022 at the Sydney Hilton Hotel.”
PNG Business News - November 27, 2022
PM Marape supports development of oil palm industry on a massive scale in PNG
Photo: PM Marape and Governor Bird in discussions with representatives of Pacific Elite Palm Oil Group in Singapore on Monday (November 21, 2022). Prime Minister Hon. James Marape has given his support to development of the oil palm industry in Papua New Guinea on a massive scale. PM Marape gave his support after he and East Sepik Governor, Hon. Allan Bird, met with representatives of Pacific Elite Palm Oil Group in Singapore on Monday (November 21, 2022). The company currently runs an oil palm project in East Sepik, which it wants to emulate in all provinces, saying that it will be an economic gamechanger for the whole country. The company aims to create the largest agriculture-based wealth in the South Pacific, as well as generate electricity for PNG, using oil palm. Governor Bird told PM Marape that if a long-term oil palm development plan was drawn up, with the aim of economic independence for PNG, one million hectares of oil palm grown all over PNG would bring in an extra K100 billion for the country. “We can double our GDP just from palm oil,” he said. “If we go into downstream processing, this K100 billion could double, so that we could be earning K200 billion on top of our current GDP. “The other flow-on to the economy is power production that fits into the grid, carbon credits, increased cattle production, as well as jobs. “Palm oil is amazing because you can do so much with it, including green energy, which can be generated from the waste of palm oil. “If we have 33 operations throughout PNG, similar to what we are doing in East Sepik, 100,000 jobs would be created “This is brilliant.” Governor Bird told PM Marape that oil palm, when made into biofuel, would save the country millions of kina. “If we produce enough palm oil, we don’t need to go out and buy fuel, as we can produce our own,” he said. “It can also bring inflation down as we are no longer importing inflation. “I’m excited because it provides us an escape plan from all these things that are affecting us.” PM Marape welcomed the proposal by Pacific Elite Palm Oil Group and the ideas of Governor Bird, who has helped to grown the vanilla and cocoa industries in East Sepik, and PNG. “As regards expanding nationwide, I invite you to come to Port Moresby, and I will run the investment figures past the super funds and Kumul Consolidated Holdings,” he told the company’s spokesperson Alexander Tho. “A family of investors can easily mobilise the money required for the project. “I also want you to have a stake in the business, and run it, as we cannot do it on our own, in like what Barrick is doing at Porgera Mine.”