Botten: State Terms Would Have Left Partners Without Returns
Oil Search Limited has released a statement on the recent fallout in negotiations on the P’nyang project in the Western province.
As project joint venture partner, managing director Peter Botten indicated that while was disappointing on its part that negotiations have ceased, he indicated that the proposition of the state would have left joint development partners with nothing to gain.
“A series of negotiations regarding the terms of the P’nyang Gas Agreement have taken place over the last seven months, leading to the Prime Minister’s statement last Friday night,” Mr Botten said.
“It is unfortunate that, at this time, the stakeholders in P’nyang cannot agree on the appropriate balance of value and benefits for a gas agreement to be concluded.
“Under the terms proposed by the State, the joint venture partners were unable to obtain a return on their investment that made the project investable and bankable.
“For Oil Search, the project returns under the State’s proposed terms were approximately the same as our cost of capital, on an unrisked basis.”
Botten’s affirmed regret over last week’s media release made by Prime Minister James Marape stating negotiations on the P’nyang Gas Agreement have stopped to allow the state to concentrate on developments already in the pipeline.
“Oil Search respects the Papua New Guinea government’s right to set fiscal terms for resources developments in PNG, to ensure the State, resource owners and the people of Papua New Guinea receive an appropriate share of value from these projects,” he said.
“Oil Search is committed to getting the correct balance, ensuring appropriate benefits are distributed to the right stakeholders. “
The resource size, cost of development and the challenges of operating in Papua New Guinea are very different to other countries, making broad comparisons with State take under other fiscal regimes in our region misleading.”
Oil Search maintained that it hopes for continued dialogue with the State on P’nyang, as its focus also will be on its Papua LNG and the Alaska investments development.
“It is our intention to now focus on the development of the Papua LNG Project, under the terms agreed in April 2019 and endorsed by the present government in September 2019.
“This is as well as on the exploration and development of our Alaskan assets.
“We will seek to advance the Papua LNG Project in a timely way, recognising that several engineering and commercial modifications will need to be made now that the P’nyang development is delayed.
“Joint Venture meetings are planned in the short term to discuss the forward program and we will update the market following these discussions,” Mr Botten said.
The markets reacted as of 31 January when the PM announced the cease in negotiations, OSH share price reduced from $7.24 to now $6.72 yesterday.
This represented a fall of 52 cents, a drop of 7.1 per cent on the Australian Stock Exchange.