Total’s PNG gas plan faces test as new PM drives changes

7/25/2019

SINGAPORE - Papua New Guinea’s petroleum minister said he’s completed his review of a recent natural gas agreement with Total SA and will recommend changes, a potential new hurdle for the delayed $13-billion effort to double the nation’s exports of the fuel.

The potential changes cover both regulatory and commercial terms of the so-called Papua LNG agreement and must be approved by the National Executive Council before submitting them to venture partners, which include Exxon Mobil and Oil Search Ltd., Kerenga Kua said in an interview Thursday. He’ll send his findings as soon as Monday to the council, a top policy making body, and expects a revised agreement with the companies completed within six weeks, he said.

“All issues are capable of discussion and compromise,” Kua said. “Even though we may have our wish list and they may have their wish list, finding the middle ground where all of us can benefit is an important principle.”

Oil Search declined to comment. Exxon and Total didn’t immediately respond to requests for comment.

Liquefied natural gas exports have developed into a political flash point for the country as its existing venture, the Exxon-led PNG LNG project, has been criticized as not benefiting the domestic economy as much as expected. The nation’s new prime minister, James Marape, swept to power in May amid a wave of criticism of the Papua LNG deal signed by his predecessor. He tasked Kua with reviewing the agreement after appointing him petroleum minister in June.

“For too long we have allowed external forces to dictate the direction we take,” Marape said Thursday at the Lowy Institute in Sydney. The government must work with its partners “to ensure a fair and equitable distribution of our resources.”

In the interview, Kua described the suggested changes as a “short list,” but declined to provide specifics. He said he’s been in communication with the partner companies.

“We haven’t rejected the signed agreement,” he said.

The review has delayed plans to double gas exports from Papua New Guinea, which involves a $13-billion expansion across separate but interlined projects. Talks on the second gas agreement, for the Exxon-led P’nyang venture, won’t begin until the Papua LNG deal is revised, Kua said.

Partner Oil Search said last week that it expects front-end engineering and design work on new LNG production units to be pushed back pending those agreements. That may move a final investment decision until as late as 2021, which puts the expansion projects at risk of greater competition for building resources and customers, according analysts at Sanford C. Bernstein.

Marape also on Thursday said his government assembled a group of advisers to assess the country’s resource laws to find the right balance between encouraging foreign investment and boosting local involvement in the sector.

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