NOOSA – Yesterday, as it closed its most beneficial deal yet, it looked like Papua New Guinea had come of age in negotiating agreements with global resource developers.
In what will be a huge boost to PNG’s struggling revenue flow, the P’nyang liquefied natural gas agreement was signed with ExxonMobil and its partners Santos and NOEX of Japan.
Amongst many other benefits, PNG has secured equity of 34.5%, much higher than the previous deals for 19.6% in PNG LNG (19.6%) and Papua LNG (22.5%).
P’nyang, which took three years to negotiate amid disruption caused by the world’s outlook for fossil fuels constantly declining.
It will be PNG’s third biggest LNG project after the PNG LNG and Papua LNG ventures and will cost the three partners K36.7 billion to develop, K1.7 billion of which has been chewed up reaching this point.
“Together, these projects will deliver production and tax revenue for PNG well beyond 2050,” said prime minister James Marape, who added that the royalties, levies and dividends will continue beyond 2050 and 2060.
A statement by Santos said the agreement marked a major milestone for the Western Province-based project, which will deliver LNG through new facilities in the province linked to the existing PNG LNG plant near Port Moresby.
Upon completion, up to 5% of gas that is produced will be made available to support the government’s electrification efforts in Western Province or another agreed location.
Construction of P’nyang development will start in 2028 around the time Papua LNG completes construction and moves into production.
“This provides a firm and stable economic base to the country for years to come,” Marape said.
“Construction activity from 2024 to 2032, (eight years non-stop, and a revenue stream for 30 plus years thereafter. Early works will generate another K150 million.”
“This is in sharp contrast to the stop-start of the past and it will provide continuity to businesses, employees, educational institutions and will serve multiple generations of Papua New Guineans.
“It makes me very proud as a Papua New Guinean.”
Marape said P’nyang would be the first time PNG had negotiated a 3% production levy (compared to 0% for PNG LNG and 2% for Papua LNG).
It had also obtained a better formula for the payment of royalties and development levies to affected landowners and provincial governments.
State equity will be about 34.5%, much higher than the 19.6% in PNG LNG (19.6%) and Papua LNG (22.5%).
An official government statement said that “the state negotiating team, under direct oversight of petroleum minister [Kerenga] Kua and Marape achieved a government take of 63% compared to 49% in PNG LNG and 51% in Papua.
“This is a massive win! This also sets a new benchmark for future negotiations,” the statement said, adding that the government has formed a partnership with ExxonMobil which should foster new exploration activity.
“Successful exploration and commercialisation of discovered resources requires large risk capital,” Marape said.
“The project partners have already spent more than US$480 million (K1.7 billion) on P’nyang and will spend a further US$10 billion (K35 billion) in developing it.
“It needs credibility, track record, a balance sheet and appetite for risk.
“My meetings in Houston with ExxonMobil president Liam Mallon left me in no doubt that they have all capabilities to make it happen.”