PM Marape Urges Foreign Investors to Comply with Mining & Petroleum Laws
by PNG Business News - February 16, 2023
Photo credit: Twinza Oil
Regulatory issues between the Government and Twinza Oil Ltd. need to be addressed before discussions on the Pasca A project in Gulf recommence, Prime Minister James Marape said.
In a press conference, Marape stated that Papua New Guinea is governed by the Constitution, and there are laws that regulate the mining and exploration activities.
The Prime Minister highlighted this in reminding foreign investors to comply with all the necessary mining and petroleum requirements.
Marape made the statement when referring to the status of the Pasca A project in Gulf, after regulatory issues emerged between Twinza Oil Ltd and the State. He said some of the requirements for the exploration and mining licenses were not met by the investor to allow it to proceed with the project.
“I just want to encourage all our foreign investors in our country, that we don’t run a banana republic, we have due processes in our country, and you have to comply with all requirements of law in our country,” he said.
“If you acquire an exploration license then you have to deliver to the intent of that license. You have a retention license in the petroleum space, then you have to deliver to the conditions of that retention license,” the Prime Minister said.
“When you are applying for development license and you’re in the APDL (application development licence) stage then you must comply with the rules and requirements of the process.”
Marape said the Department of Petroleum has done its part towards the Pasca issue, meaning that now it only needs a review by the national government.
“The Twinza and the Pasca project is a small low-hanging project within reach. The petroleum department have done their bit with the issues that have been outstanding, and now the project partner has given his view, which will be subject to a review,” he said.
The Prime Minister said his government wants to tick off Porgera, Papua LNG, P’nyang and Pasca LNG projects, including the Wafi-Golpu projects, soon.
Mr. Marape was not able to provide the actual commencement dates but is determined to provide a firm statement on these proposed multibillion-kina projects five months from now.
Twinza’s Country Manager, Roppe Uyassi, said the company was ready to have the Pasca gas project in progress and was awaiting reengagement with the Government through the state negotiation team.
PNG Business News - May 07, 2021
Pasca A Project now Expected to Start in 2025
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 - 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.”
Paul Oeka - March 27, 2023
Papua LNG project to Minimise Economic Challenges
Photo: Petroleum Minister Kerenga Kua Petroleum Minister Kerenga Kua has recently stated that the Papua LNG project is critical in addressing some of the economic challenges that are currently faced in the country. He said about K75 billion will be generated over a 15 year period when the project is in progress. He added that the initial stages of the project has commenced with K500 million said to be inputted into PNGs foreign exchange capacity in 2023. During a press conference on Thursday the 9th of March, The Petroleum minister highlighted the progressive stages of the Papua LNG project and emphasized the importance and significance of the benefits that the project will provide. According to studies the project life is expected to operate over a 15 year period that will generate about K75 billion and significantly boost Papua New Guinea's struggling economy. "The K75 billion benefit is inclusive of what comes to the state directly as levies, to Kumul Petroleum, to the landowners as royalties and the provincial governments. All of us put together are going to be collecting and sharing that benefit in the next 15 to 20 years", Kua said. Minister Kua said that studies for the Papua LNG project began in 2004 following the discovery by Interoil, the resource estimate is in the range of 6 trillion cubic feet of gas and 98 to 100 million barrels of condensive oil. The benefit of this project is immense and a positive component is the national content which is expected to positively impact GDP, export earnings, forex, revenue to impacted levels of government, landowner benefits and Job opportunities. Minister Kua said the project developer Total Energies will inject K500 million into the PNG economy in 2023. "The Papua LNG project is a project of national significance for Papua New Guinea and will stimulate business confidence and will provide a significant impetus for our economy", "The Marape-Rosso government places high priority on the delivery of the Papua LNG project, we have an improved deal for our people, and improved contribution for our national contractors and workforce. The government strongly supports the Papua LNG project and encourages all stakeholders including project partners to work diligently to deliver the project on time and on budget", Minister Kua said. Petroleum Secretary David Manau was also present at the conference, he highlighted that the petroleum department will work closely with impacted provincial governments and landowners as this is important in ensuring that all stakeholder grievances are discussed and addressed. In light of this, a development forum is expected in the third quarter of this year. Meanwhile, Kua also revealed a unique aspect of the upcoming project which will mitigate the project's carbon footprint and is set to make PNG in becoming the first country in the Asia Pacific region and only the second on the world to re-inject carbon dioxide back into the well pad in a LNG project. He said the re-inspection of carbon dioxide into the well pad is a significant step towards reducing the project's carbon footprint and will help mitigate the environmental impact of the project and contribute to Papua New Guinea's efforts to combat climate change. The Papua LNG project is a joint venture between the PNG government, TotalEnergies and Exxon Mobil. It is one of the largest investments in the country's history and is expected to generate significant revenue for PNG's economy. Total Energies holds 40.1 percent interest in Papua LNG, along with its joint venture partners Exxon Mobil (37.1 percent) and Santos(22.8 percent). The Papua New Guinea government may exercise a back-in right of up to 22.5 percent interest at the Final Investment Decision (FDI) planned by end of 2023 to early 2024 and production will be scheduled for four years later.
PNG Business News - March 27, 2023
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PNG Business News - March 27, 2023
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