The project calls for the development of the P’nyang gas field to help in the expansion of the ExxonMobil-operated $19bn PNG LNG project
The Papua New Guinea (PNG) government said that it has stopped negotiations with US oil and gas firm ExxonMobil over the proposed P’nyang gas project in the country.
The gas project calls for the development of the P’nyang gas field to help in the expansion of the ExxonMobil-operated $19bn PNG LNG project, which has been in production since 2014.
However, the PNG government and ExxonMobil could not reach a consensus on the terms of the P’nyang gas agreement.
PNG Prime Minister James Marape said that the US company was not willing to agree to “reasonable terms” with the government’s negotiators in supporting the development of the P’nyang natural gas field.
Marape added that ExxonMobil proposed an ‘out-of-the-money’ deal for PNG and was not intending to make concessions in contrast to the government’s willingness. The government said that with the negotiations over the P’nyang gas project stopped, it can focus on developments that are already in the pipeline.
PNG Prime Minister statement on the P’nyang gas project
James Marape said: “The terms we proposed to Exxon Mobil were fair, ensuring PNG benefits from the project while the international oil companies made decent returns. Our proposals were rejected as these companies tried to extract even more profit for themselves.”
The failed talks have now put doubts on the prospects of a $13bn plan of ExxonMobil, Total, and other partners in the Papua LNG project of doubling liquefied natural gas (LNG) exports in PNG by 2024, reported Reuters.
In April 2019, Total and its partners ExxonMobil and Oil Search signed a gas agreement with the PNG government which defined the fiscal framework for the Papua LNG Project.
The PNG government is reportedly seeking far better terms for the P’nyang gas project compared to the agreement it signed with Total for the Papua LNG project.
Discussions on the P’nyang project were earlier put on hold in 2019 with the PNG government looking to revise Total’s agreement for the Papua LNG project. In September 2019, the Papua LNG project deal was endorsed by the government following certain concessions from Total.
ExxonMobil’s partners in the proposed P’nyang gas project are Oil Search, Santos, JX Nippon, and Kumul Petroleum and Mineral Resources Development (MRDC).
Oil Search stated: “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.”
The company said that it will continue talks with the PNG government on the P’nyang gas field project.