LNG Agreement To Boost Business Confidence – Kina Bank
The Papua LNG project has recently been given the all-clear by the government after re-examining the terms of the agreement.
Total Exploration & Production PNG Ltd (Total E&P) and the government have provided certain undertakings in good faith to ensure an amicable and speedy conclusion to negotiations.
The Minister for Petroleum Kerenga Kua said the government has now cleared the Papua LNG project to proceed “full steam ahead”.
The announcement notes the government’s position is based on a letter received from Total E&P on 21 August 2019.
The letter outlined concessions in respect of national content, third party access to pipelines, pipeline ownership, and the potential for use of LNG tankers in which a participating interest is owned by the State.
The announcement states that the government’s position is that the Papua LNG Project will be allowed to proceed in accordance with the terms of the Gas Agreement, interpreted and applied in accordance with the letter “and the related expectations of the government and the State”.
Kina Bank’s executive general manager Business Partners and Wealth Management, Deepak Gupta, said that Kina Bank sees this development as positive for business confidence.
The construction cost of Papua LNG is estimated to be around US$13 billion, which is a significant amount of foreign direct investment into the PNG economy.
In Kina Bank’s opinion the importance of the timely commencement of the Papua LNG Project cannot be overstated.
He also said notwithstanding the Total announcement is a positive, the P’nyang based expansion of the PNG LNG facility may remain an open issue that is required to be concluded in order to bring a higher level of certainty to the overall project, and facility expansion.
The government has signaled its intention to move from the current concession based arrangements to production sharing arrangements which is a significant change in policy.
Kina Bank views the shift in policy is best served through broad consultation with industry and stakeholders to ensure future projects remain competitive and meet the requirements of all involved; whilst also avoiding any unintended consequences for a sector that is a large contributor to PNG’s GDP and dependent on ongoing foreign investment.
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