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PNG Business News - December 08, 2021

Santos May Pursue PNGX Listing

According to the company, Santos Ltd may pursue listing on the PNG National Stock Exchange (PNGX). Santos Managing Director and Chief Executive Officer Kavin Gallagher said the business was exploring it as the merger with Oil Search developed. “Momentum continues to build for the compelling opportunity to create a company with the size and the skill to fund the energy transition,” he told the PNG Mining and Petroleum conference yesterday. “It is also our intention to seek to establish a secondary listing on the PNG Exchange. “This will importantly allow all the PNG-based shareholders to trade their Santos shares on the exchange.” Gallagher claimed he had discussed his company's beliefs with Prime Minister James Marape on multiple occasions. “This merger will create an entity that will have the advantage to fund major projects in PNG and will facilitate the creation of a highly-skilled workforce and progress long term wealth and prosperity of the people of PNG,” he said. “Importantly, the merged entity will bring significant benefits to shareholders and PNG including more than 4,000 Oil Search shareholders who currently live in Papua New Guinea.” Santos had made multiple pledges to Marape regarding job security following the merger, according to Gallagher.   Reference: Pacific Mining Watch (5 December 2021). “Santos considering listing on PNG Stock Exchange: CEO”.

Oil and Gas

PNG Business News - December 08, 2021

PNG LNG Project Earns K11B

Photo credit: Oil Search According to ExxonMobil PNG Ltd, the PNG LNG project has earned K11 billion in revenue for the government thus far. This was announced by managing director Peter Larden at the recent PNG Mining and Petroleum conference. “Up to October this year, PNG LNG has generated K11 billion in revenue to the State and landowners, which obviously supports investments and services and infrastructure across the country,” Larden said. “In addition, K15 billion in business opportunities (were) generated across the country from the project.” Papua New Guineans made up more than 91 per cent of the company's workers, according to Larden. He also revealed some of the firm's plans. “In July this year, I announced the restart of Angore project which was suspended in 2020 because of the pandemic,” he said. “Angore was part of the original project development plan. “This year, we engaged with the Government and the State Negotiating Team on the P’nyang LNG project. In September, we entered into an important head of agreement in Houston, Texas. “Since that time, we have been in active discussions on the gas agreement and we remain committed to progressing those to a conclusion. “P’nyang will construct new upstream facilities in Western and link them with existing pipeline infrastructure and the LNG plant in Caution Bay. “It will be an in an independent project, covered under a future benefit-sharing agreement. “Gas from P’nyang will support domestic power supply, improving access to electricity power to Western and surrounds. “We are also proud to be part of the Papua LNG project. Momentum is building with studies underway with front-end engineering set to begin next year. “The two projects could last up to a decade of continuous construction activities. “This would be significant to the country with potentially more than K65 billion.”   Reference: Pacific Ming Watch (6 December 2021). “PNG LNG generated K11billion revenue”.

Oil and Gas

PNG Business News - December 06, 2021

Parliament Enacts Oil and Gas Bill

The Oil and Gas (P'nyang LNG Project) (Amendment) Bill 2021 was just enacted by Parliament. The development partners in the P'nyang LNG Project will now be able to submit for an application and a petroleum development license as a result of this adjustment. When introducing the bill in Parliament, Minister for Petroleum KerengaKua stated that the purpose of the amendment Act to the Oil and Gas Act 1998 is to ensure that the state and the P'nyang gas project participants can execute a gas agreement similar to the one envisioned by the Heads of Agreement signed between the state and ExxonMobil on September 28, 2021. According to Mr Kua, this ensures that the P'nyang gas project would not be impacted by the Oil and Gas Amendment Act of 2020. “The Oil and Gas P’nyang LNG Project amendment bill 2021 only concerns the P’nyang LNG project alone and any application for a petroleum development licence for the P’nyang LNG project and not any other gas agreement or project or petroleum development licence in PNG. It confirms that, the changes brought about the 2020 amendments will not create any inconsistencies with the application process for the P’nyang LNG project for a Petroleum development licence which the project want us to have applied for in,” he said. Minister Kua noted that the application for the P'nyang field petroleum development licence was submitted prior to the 2020 changes, and transitional clauses did not take this into account, making the application for the P'nyang gas project subject to the 2020 amendments. “The gas agreement for the P’nyang gas project is anticipated to be concluded within December this year. Which will essentially include the broad terms which includes the preservation of the receipt in place prior to the 2020 amendments. It is important to note that the proposed amendment to the oil and gas amendment act will assist further negotiations and processing of application for the petroleum development license which is to follow.” he said.   Reference: Post-Courier (3 December 2021). “P’nyang LNG Project Amendment Passed”. 

Oil and Gas

PNG Business News - December 06, 2021

PUMA Energy PNG Napa Napa Oil refinery In Danger Of Closing Its Doors

According to country manager Hulala Tokome, Puma Energy PNG Ltd's Napa Napa refinery is in danger of closing by the end of this month. Tokome explained that the planned customs levy on imported refined gasoline products would be the cause of this. The proposed adjustments include a 5-toea tax cut for refined diesel and petrol, which the government claims would boost fuel industry competitiveness. According to Tokome, the refinery's shutdown would result in the loss of 150 jobs and significant tax revenue for the state. “The removal of the import tariff would result in importers paying less taxes in country and risk the viability of the Napa Napa refinery operations including the jobs it supports,” Tokome said. “The import tariff was introduced (in the 2018 National Budget) for two main reasons, it supported the viability of the Napa Napa refinery and the approximately 150 skilled manufacturing jobs and meant importers paid taxes in country rather than keeping profits offshore,” he said. “The import tariff has never been passed on to the consumer as the Independent Consumer and Competition Commission (ICCC) controls prices. “The ICCC price formula which limits the maximum price at the retail pump does not have the import tariff included. “So increasing or decreasing the import tariff has no impact on the price at the pump. “The proposed changes puts a risk on the viability of the refinery (Napa Napa) beyond the end of this year.” ExxonMobil is said to be the biggest importer of petroleum products into PNG. Puma Energy is the country's largest importer of crude oil, which is subsequently processed into petroleum products, encouraging downstream processing, which in turn provides employment and taxes. Puma now has a market share of roughly 55% in the country. Tokome also stated that they were looking forward to collaborating with the government to come up with a solution that would safeguard both consumers and PNG's indigenous refining capability. The Independent Consumer and Competition Commission did not respond for comment.   Reference: One PNG (1 December 2021). “PUMA Energy PNG Napa Napa Oil refinery at risk of closure, says executive”.

Oil and Gas

PNG Business News - November 26, 2021

Marape: Team Working on Gas Agreement for P’nyang

Prime Minister James Marape stated that the State Negotiating Team is now working on a gas agreement for P'nyang. Following the State Negotiating Team's recent travel to Houston, Texas, Ivijitari Member Richard Masere asked Marape to offer an update on the Papua and P'nyang gas projects. Masere inquired whether the Prime Minister could offer an update on the two projects' start dates and the advantages they will bring to the country. When responding, Marape stated that the P'nyang project has yet to get off the ground because the state negotiating team is still working through the details of the agreements to ensure that the legal provisions are in place, that the project is legal, and that it is operating within the laws of this country. “The state negotiating team are working to ensure the gas agreement is delivered to the investors on what we want,” he said. From 2024 to 2030, he estimated that both Papua and P'nyang will take about seven to eight years to build. “Papua LNG is at the pre-FEED and FEED stage. They (TOTAL) have given indication to me that the FEED would be if not completed by the end of 2023, the latest would be around 2024. When FEED is completed, the project is good to go now and so based on the Front End Engineering Design of the project proponents then mobilise the capital. We will then be able to fully understand the size or scope of the project,” Marape said.   Reference: Post-Courier (19 November 2021). “Gas Agreement Under Way For P’nyang”.

Oil and Gas

Marcelle P. Villegas - November 21, 2021

The Waiting Game: Pasca A Gas Agreement still on hold

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.” 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) ----- Reference: [1] Twinza Oil Limited media release (24 August 2021). "Pasca A Gas Agreement Yet To Be Finalised Despite Instructions From The Minister For Petroleum". https://www.twinzaoil.com/media-releases/2021/08/24/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" https://www.twinzaoil.com/media-releases/2021/04/19/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". https://www.twinzaoil.com/media-releases/2021/06/02/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". https://www.twinzaoil.com/media-releases/2021/08/09/png-state-not-honouring-terms-in-pasca-a-gas-agreement-which-were-announced-by-prime-minister-13th-july-2021

Oil and Gas

PNG Business News - November 18, 2021

Santos Submit Application to ICCC Seeking Clearance for Proposed Merger with Oil Search

Photo credit: InDaily Santos Ltd has submitted an authorization application to the Independent Consumer and Competition Commission (ICCC) seeking clearance for its proposed merger with Oil Search Ltd. Santos and Oil Search have agreed to a binding merger implementation deal, according to ICCC Commissioner and Chief Executive Officer Paulus Ain, under which Santos planned to combine with Oil Search under a scheme of arrangement under PNG law. “Upon successful implementation of the (deed), Santos will acquire all the shares in Oil Search and the current shareholders of Oil Search will own (around) 38.5 per cent shares in Santos,” he said. The stockholders of Santos will own the remaining 61.5 per cent. “Authorisation for business mergers and acquisitions under the ICCC Act is a statutory process through which businesses seek approval from the ICCC before proceeding with any business mergers and acquisitions that would otherwise raise serious competition concerns and potentially breach the Act,” he said. The ICCC is required under the protocol to solicit stakeholder comments/submissions on every proposed transaction under review. “The ICCC is therefore inviting relevant stakeholders and the general public to provide comments and submissions on the likely competitive effects this proposed merger. “All comments and submissions should reach the ICCC by or before Monday, Nov 22, 2021.” Santos is an Australian energy firm that specializes in hydrocarbon exploration, development, production, transportation, and marketing (crude oil and natural gas). It is a major natural gas provider and the largest domestic gas supplier in Australia and Asia, with ambitions to become the dominant Asia-Pacific LNG supplier. Santos does not own or operate any assets in PNG; instead, it owns ownership interests in projects run by other parties or Joint Venture partners. All of PNG's producing oil fields are operated by Oil Search. Except for ExxonMobil, Oil Search exports and provides condensate (crude oil) to both international and domestic markets on behalf of its JV partners. PNG's only oil pipeline and oil processing facilities are both owned by Oil Search.   Reference: The National (15 November 2021). “Santos seeking to cement deal”.

Oil and Gas

PNG Business News - November 08, 2021

PNG LNG Earnings to Reach K15 Billion in 2021

According to a projection, total earnings from the PNG LNG project would reach US$4.5 billion (K15.4 billion) in the fiscal year 2021. According to estimates recently released by JMP Securities, PNG-based equity and fixed interest markets broker/dealer, Kumul Petroleum Holdings Ltd (KPHL) will earn between US$750 million and US$775 million (roughly K2.5 billion and K2.6 billion) from the project this year, based on current high prices. It also estimates that total earnings from the PNG LNG Project to KPHL have been to the tune of US$5.1 billion (about K17.5 billion) since the project began operations in 2014.  “This is an estimate of revenue only,” said JMP Securities. “We are not in a position to comment on the overall costs of operations associated with the project or the wider operations of KPHL,” “Given the current high international crude oil prices and the time lag between movements in oil prices and the pricing of LNG under long-term contracts, we expect continued benign trading conditions for PNG LNG in the coming months. “This will result in a strong performance for the 2021 financial year as a whole. “We estimate that the PNG LNG Project has sold LNG, condensates, domestic gas and naphta valued at US$30.27 billion between April 2014 and September 2021. “More than 80 per cent of revenues come from the sale of liquefied natural gas (LNG). “We estimate that the PNG LNG has sold the equivalent of close to 600 million barrels of oil since 2014. “Around 100 million boe (barrels) have been sold by KPHL. KPHL sells around 35,000 to 40,000 boe per day. “We estimate that the highest average quarterly gas export prices achieved by PNG LNG are US$14.41 (about K49.4) per mmbtu (metric million British thermal units). This was achieved in the June quarter of 2014 on modest volumes.” In the September 2021 quarter, PNG LNG achieved around US$10 (about K34.3) in average gas sales prices. “The lowest gas prices were achieved in the September quarter of 2020 – around US$4.2 (about K14.4) per mmbtu.”   Reference: Pacific Mining Watch (2 November 2021). “Papua New Guinea expects K15 billion from PNG LNG in 2021”.

Oil and Gas

PNG Business News - October 29, 2021

Numbers up for Oil Search in Q3

Peter Fredricson, Acting CEO, said “Oil Search delivered another strong quarter of production, which was up 5% on the previous quarter, demonstrating the resilience of our operations and sustained commitment to the safety of our people and maintaining safe and reliable production. Operating revenues were up 12%, supported by strong growth in oil prices.” “Earlier in the quarter, the PNG LNG project participants approved the full funding of the Angore project which, along with the Associated Gas fields, forms an important part of the gas sequence and underpins maintaining plant capacity beyond 2030.” “We have made good progress across our growth projects with the ramping up of activity in the Papua LNG project, as it prepares to enter pre-FEED before the end of 2021 ahead of a joint venture decision to enter FEED in 2022.” “We are also pleased to be another step closer to the development of the P’nyang gas resource with the recent signing of a HOA between ExxonMobil and the PNG Government outlining the framework for negotiating a fullytermed Gas Agreement before the end of 2021. The P’nyang project represents a valuable back-fill opportunity within the PNG LNG gas sequence and another opportunity for Oil Search to be involved in a key project that will support the PNG economy and its people.” “In Alaska, the Pikka Phase 1 project has progressed technical work towards FID. As previously communicated Oil Search and its co-venture partner are focused on ensuring the appropriate pre-conditions, including funding, are met prior to taking FID targeted in 1H22, with resulting first oil planned for 2025.” “While the absolute focus of our workforce remains on safely delivering our strategic objectives, important steps were also taken during the quarter to advance the opportunity presented by the proposed merger with Santos. The potential benefits of a combined entity remain clear, with the merged entity expected to sit amongst the world’s 20 largest global oil and gas companies, bringing greater access to capital markets to enable funding for new and existing opportunities. Importantly, the merger is also expected to create greater alignment across the LNG growth projects in PNG which would continue to support jobs, development, and investment in PNG.” “Our outlook for the 2021 full year remains positive as we tighten our production guidance and maintain our operating cost guidance despite the additional costs associated with the management of the impact of COVID-19. Both LNG and oil markets remain strong, with spot LNG markets continuing to exhibit high volatility and record highs which is a supportive environment for market soundings in respect of new medium-and-longer term LNG sales contracts.” “While our focus remains on mitigating the risk to our people and operations through strict adherence to COVID-19 protocols and the promotion of vaccination uptake in our workforce, Oil Search will also continue to play its part in PNG’s fight against COVID-19 through the provision of community vaccination and logistical support.”   Article courtesy of Oil Search

Oil and Gas

PNG Business News - October 18, 2021

Marape is Eager to Help Santos Ltd

Santos Ltd is a fresh entrance into the country's petroleum sector, and Prime Minister James Marape is looking forward to assisting it. In Port Moresby, he recently met with Santos managing director and chief executive officer Kevin Gallagher. Santos' merger with Oil Search Ltd was explained to Marape, as well as the company's broad strategic goals, long-term commitments, particular processes, and projected merger timescales. “It was important for me to recognise the commercial nature of this merger and the regulatory processes which it is following,” he said. “The meeting provided me with the basic appreciation of the intentions of this merger and the timelines. “I congratulate Santos on its move to expand its presence in the country. “I also look forward to supporting the new entity as our successive governments have done for Oil Search in the past.” Oil Search Ltd has a long history with PNG, according to Marape, and while the merger would result in a renaming of the company, the new organization would be considerably larger. “It will provide a stronger balance sheet for important developments in all the Oil Search and Santos licences in PNG,” he said. “This is a positive development in terms of PNG investment destination aspirations.” Santos also informed Marape on their governance, people development, and commercial arrangements, as well as new energy concepts and future talks on critical issues including equity post-merger. “I was especially delighted to hear Santo’s willingness to engage in discussions about the future outlook of the company because it resonates well with our government’s position to look at key national empowerment interests.” He was in attendance at the meeting with Governor William Powi of the Southern Highlands, Kumul Petroleum Holdings Ltd managing director Wapu Sonk, and Secretary to the Prime Minister's Department Ivan Pomaleu.   Reference: The National (14 October 2021). “Marape keen to support Santos”.

Oil and Gas

PNG Business News - October 14, 2021

PM MARAPE REASSURES PNG OF A BETTER DEAL FROM P’NYANG GAS PROJECT

Photo credit: Richard Dellman - EMTV Prime Minister Hon. James Marape has reassured Papua New Guinea of a better deal from the P’nyang Gas Project in Western than previous projects. He gave this reassurance in Parliament (Tuesday Oct 12) when answering a series of questions from North Fly MP Hon.James Donald in relation to P’nyang, as well as execution of the Heads of Agreement (HOA) on P’nyang Gas Agreement along with an Equity Purchase HOA with ExxonMobil in the USA last month. PM Marape said he, and Petroleum Minister Hon. Kerenga Kua, would give a detailed answer to all 13 questions posed by Donald later. “The Heads of Agreement we signed in Houston was to set out a framework to guide us into a proper Gas Agreement with ExxonMobil as developer,” he explained. PM Marape said when he became Prime Minister in May 2019, his first statement was that P’nyang would not be part of Papua LNG, as the previous O’Neill government had wanted. He assured Donald that his people of North Fly, Western and PNG would get a better deal from P’nyang as the world moved towards cleaner energy. “The State will get 63 per cent of total project economic benefits from P’nyang,” PM Marape said. “PNG LNG sits at 49 per cent, Papua LNG sits at 51 per cent. “I want to give a big thank to (Gulf) Governor Haiveta for leading the team as my special envoy. “This (negotiation with ExxonMobil) was a National Government function, and as we move towards the Gas Agreement, there will be a time to call in the province and landowners. “This will be a public exercise as we did with PNG LNG.” PM Marape said his Government’s wanting to take back more for PNG included P’nyang, Porgera, forestry and other resources. He thanked ExxonMobil for understanding the dynamics at play, including allowing for the Stae to acquire an additional 10 per cent equity. PM Marape also noted the planned Oil Search-Santos merger, and said that in the event they offloaded part of their stake in P’nyang or PNG LNG, national interest – through Kumul Petroleum - would take precedence The Gas Agreement HOA captures key fiscal, regulatory and licencing terms. The Equity HOA provides for the State to acquire at cost 10 per cent additional equity from ExxonMobil in the P’nyang Project. The overall deal reflects a win-win for both sides. In addition to all the legal entitlements, the State’s take is at 63 per cent in this deal compared to 49 per cent in PNG LNG and and 51 per cent in Papua. This is made possible by increased production levy of 3 per cent and the State equity (including the commercial purchase) being 32.5 per cent compared to just 19.6 per cent in the PNG LNG and 22.5 per cent in Papua. The deal makes P’nyang an investment grade bankable project, meeting the project partners’ investment thresholds and gives it the best chance of going into construction.   Article courtesy of Department of Prime Minister & National Executive Council

Oil and Gas

PNG Business News - October 13, 2021

'Papua LNG Will Begin Operations In 2027'

Total E and P managing director Jean-Marc Noiray stated the Papua LNG project will begin in 2027. After three years of delays, he said the business was mobilizing its project team. “Our project of Papua LNG, after three years of delay, we are again, mobilising our project team, targeting front end engineering and design (Feed) entry through to 2022, final investment decision final investment decision (FID) in the fourth quarter 2023 and start four years after in the fourth quarter of 2027,” Noiray said. During the second European Union-Papua New Guinea Business, Trade, and Investment Conference, he stated this. “Total will continue with its partners, investing US$10 billion (about K34.29 billion) from FID, knowing that we have already invested US$2 billion (about K6.85 billion) in exploration, pre-Feed and others,” Noiray said. “So this investment will allow producing 5.6 million tonnes per year in LNG (liquefied natural gas) over 15 years, adding to the 8 million tonnes per year produced from the PNG LNG. “Investment of the project will amount to about one-third of the gross domestic product (GDP) and will add a major source of income to the country and direct and indirect jobs. “The project will impact two provinces – Gulf, for the upstream processing facilities, and Central,” Noiray said. “The two new trains of production will be constructed within the fence of the existing PNG LNG, to maximise the synergies. “The constraint of building simultaneously a train has been lifted as P’nyang will be developed into the existing PNG LNG facility. “Our constraints are foreign exchange limitation, unreliable utilities, lack of infrastructure, security or law and order, and shortage of expertise and skilled workers.”   Reference: Mauludu, Shirley. The National (12 October 2021). ‘Papua LNG to start in 2027’

Oil and Gas

PNG Business News - October 01, 2021

Chamber applauds P’nyang Heads of Agreement signings

The Papua New Guinea Chamber of Mines and Petroleum has applauded the signing of Heads of Agreements for the P’nyang Gas project. Chamber President, Anthony Smaré, stated “Our country desperately needs new gas and mining projects to bring in foreign exchange, create thousands of jobs, create significant business opportunities for PNG SMEs that desperately need them, and generate additional revenue for the State to fund important government services. “The signing of the heads of agreement after a successful negotiation between the PNG Government and ExxonMobil earlier this week in Houston USA was an important first step in the finalization of the necessary agreements to pave the way for the construction of the P’nyang Project”. “It is pleasing to see the positive and constructive manner in which the Prime Minister and his team approached the negotiation with the developers, and the win-win outcome that was secured for the country.  As the Prime Minister stated, it is also important to note that the State was able to secure these advantageous economic benefits via a commercial negotiation with ExxonMobil under the current resource sector laws – this win-win outcome was achieved without changing any laws”. “The signing of these HOAs signal a continued push in the right direction of returning stability to the resource investor climate and led by ExxonMobil and its partners committing to the project, and agreeing with the government on its expectations. It will help retain and build investor confidence in the country’s existing resource laws, amongst other potential developers across the globe,” he said. “I extend my congratulations also to the state entities Kumul Petroleum and Mineral Resources Development Corporation and Petroleum Minister Kerenga Kua and Gulf Governor Chris Haiveta who all played leading roles in the negotiations”.   “The global energy market is moving through a period of transition, away from fossil fuels, and into renewable energy.  PNG is facing a risk that if it doesn’t convert the opportunities to develop its gas resources now, it will lose that opportunity forever, and the present generation of Papua New Guineans will pay the price in lost income, education, and health outcomes.  That is why the successful P’nyang heads of agreement negotiations were significant.”

Oil and Gas

PNG Business News - September 30, 2021

Papua New Guinea Government and ExxonMobil Execute P'nyang Gas Agreement

Papua New Guinea Prime Minister  James Marape, accompanied by Petroleum Minister Kerenga Kua, Justice Minister Bryan Kramer, Gulf Governor Chris Haiveta and Hela Governor Philip Undialu, today met with the ExxonMobil President for Upstream Mr Liam Mallon in Houston and the senior executive team where the State executed Heads of Agreement (HOA) on P’nyang Gas Agreement along with an Equity Purchase HOA with ExxonMobil. The Gas Agreement HOA captures key fiscal, regulatory and licencing terms negotiated over last two months. The Equity HOA provides for the State to acquire at cost 10% additional equity from ExxonMobil in the P’nyang Project. The overall deal reflects a win-win for both sides. In addition to all the legal entitlements, the State’s take is at 63% in this deal compared to 49% in PNG LNG and and 51% in Papua. This is made possible by increase production levy of 3% and the State equity (including the commercial purchase) being 32.5% compared to just 19.6% in the PNG LNG and 22.5% in Papua. The deal makes P’nyang an investment grade bankable project, meeting the project partners’ investment thresholds and gives it the best chance of going into construction. The Prime Minister said, “The project timing is sequenced in a way that P’nyang commences as soon as Papua construction is complete.  "This provides costs synergies which will provide certainty and opportunity to PNG businesses for a period of eight years of construction of these two projects.  "The businesses can plan ahead with certainty and continuity over eight years and this augurs well for continuous economic growth. "The present P'nyang project model is different from the earlier model which was planning of additional train of gas.  "In this new update, P'nyang will involve synergy between P'nyang and PNGLNG, however we have to take time to renegotiate with ExxonMobil to ensure that State wins big in the overall project economics that empowers Western Province and its landowners as well as ensuring that PNGLNG benefits are not diluted but improved for landowners and provincial governments. "We apologize for the delay on P'nyang but it had to happen to help us get the best deal for our country even without changing the laws - with open, strong and honest negotiations with our investors. "The little wait has brought us to the point where we have commercially negotiated a better ‘take back’ more for our country," said PM Marape. The Prime Minister continued to thank ExxonMobil for its willingness to enter into the discussions with an open mind to allow for best outcome for landowners and provincial governments, adding that he was equally happy to hear of the company's assurance to look into certain legacy issues in PNGLNG. "We bring a partnership outlook into our discussions and I am pleased to note ExxonMobil’s willingness to help maximise benefits to all stakeholders. The terms of the HOA demonstrate this willness in the most practical manner”, said the Prime Minister while thanking  the State Negotiating Team headed by Treasury Secretary Mr Dairi Vele for successfully concluding the negotiations. The Prime Minister also took the opportunity to state to ExxonMobil that any share restructuring of both P'nyang and PNGLNG in light of Oil Search and Santos merger would be in the national interest of PNG and that PNG takes precedence in exercising its option to acquire the equities. Mr Liam Mallon, President, Upstream Oil and Gas of ExxonMobil said: “we will work with the government to align on a gas agreement that ensures fair benefits for the people of PNG and the stakeholders. The HOA is a critical step towards alignment on a gas agreement that will help define the development and operation of P’nyang Project for the long term” Mr Peter Larden, PNG LNG Managing Director, thanked the Government on behalf of the joint venture partners and said, “through our partnership with PNG, we will continue to drive investment, development and promote social and economic welfare across Western Province and the country” Petroleum Minister Mr Kerenga Kua said, “this deal guarantees ExxonMobil’s continued presence in PNG for a long time to come, which is a big plus for PNG as it attracts new exploration and strengthens PNG’s credentials globally as an investor-friendly destination with competitive fiscal terms to attract and retain large oil companies.” The two sides will continue discussions in the coming months to draft a more detailed gas agreement and the equity agreement. "This now secures for the next 10 years pre FEED ( front end engineering design ) and FEED exploration and design costs, plus construction of both Papua LNG and then P'nyang from 2022 to 203O.  "Construction cost of both projects will exceed $25 billion and once complete the two projects will ensure PNG produces and exports gas all the way into 2050 while providing jobs and taxation revenue to PNG," PM Marape concluded.

Oil and Gas

PNG Business News - September 24, 2021

Talks Between ExxonMobil and Govt “Good”, Says Marape

The talks between ExxonMobil and the government on the P'nyang gas project have been hailed as "good" by Prime Minister James Marape. Last month, the two companies signed a letter of intent to commence project talks. “ExxonMobil will be resuscitating conversations on the P’nyang gas fields which is up north from the present PNG LNG. P’nyang will be brought back to the table,” he said. Marape just departed the nation to attend the UN General Assembly in New York and continue discussions with the firm. “If I could win above present thresholds, as far as where our laws allow or winning better than the PNG LNG and Papua LNG, we will come back with news on how P’nyang will be,” he said. “But we will be pushing hard on ExxonMobil.” ExxonMobil and the State Negotiating Team are “in excellent discussions,” according to Marape, based on the indications received. “Hopefully, my showing-up in Houston, Texas, the headquarters of ExxonMobil, will cement how the future of P’nyang will be, subject to how the negotiations will come to a conclusion,” he said. “It might be a win/win for us, a win/win for them that embraces also the PNG LNG area footprint and the legacies that we are living with as far as the PNG LNG project is concerned.” Marape said once negotiations with ExxonMobil were completed, “we should (know) how P’nyang will feature”. He estimated that the Papua LNG project will be completed in 2024/ 2025. “We would like to extend the construction phase in the LNG sector to two, three years, piggybacking on the possibility of bringing P’nyang into the picture.”   Reference: The National (21 September 2021). “Discussion on project good: PM”. 

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