| Bloomberg | Extracts
NEW YORK - Exxon Mobil Corp’s partner on a Papua New Guinea gas project that’s threatened by failed talks with the government has hit back at PNG’s position, saying its terms were uneconomical.
Oil Search, in its first comment since the talks broke down on Friday, said that the government’s demands meant the project would not gain a sufficient return on investment.
The impasse casts doubt on a broader $13 billion plan to double the country’s exports after prime minister James Marape, who came to power on a promise to increase the nation’s share of resources wealth, said that Exxon’s proposed terms were ‘out-of-the-money’ for PNG.
The country’s take from the project would have been “significantly less” than deals done elsewhere in the region, including Malaysia, where Exxon has a big operation, Marape said.
According to Oil Search, the size of the resource, cost of development and the unique challenges of operating in PNG made comparisons with other arrangements in the region “misleading”.
“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,” managing director Peter Botten said in a statement to the Australian Stock Exchange.
Oil Search said it would “seek to advance the Papua LNG project in a timely way,” but added that several engineering and commercial changes would need to be made following the P’nyang delay.
Marape doubled down on his criticism of Exxon in a Facebook post, saying the company was “not sincere” in dealing with the government on P’nyang.
Referring back to the original Exxon-led PNG LNG project, which started in 2014, Marape said that “to date my families, my tribes and my provinces and country are yet to fully see those promised windfalls yet the state continues to foot the social cost of this project.”