According to project operator Twinza Oil Ltd, the government has raised its demand for the Pasca A Gas agreement once again, ahead of the scheduled signing.
According to a statement from Twinza, the government told the firm last Friday that signing the agreement now demanded a 6% production levy.
It read: “This is 4 per cent higher than the production levy that was agreed as part of the comprehensive terms (agreed terms) for Pasca A, negotiated by the state negotiating team and announced by the Prime Minister James Marape last Sept 24.
“The additional levy requested would make the Pasca A project un-financeable for any investor.
“The agreed terms would have delivered the highest State take from any resource development in PNG and were widely regarded as meeting all of the demands of the State, including early revenues, full royalty and development levy entitlement and a domestic market obligation of 5 to 10 per cent while satisfying the requirements of project financiers.”
it said that the State had also attempted to amend the negotiated terms through a letter from Petroleum Minister Kerenga Kua on February 4.
“The Government’s demand to raise the fiscal take to (between) 55 and 60 per cent nominal share, which is 75 to 85 per cent of the actual project value, would make Pasca A unviable for investors and financiers alike,” it said.
“Notwithstanding the changing State positions, Twinza remains committed to PNG and progressing the Pasca A Project on the agreed terms.”
Twinza gave an extra concession to the negotiated terms, raising the production levy to 4%, with a further rise to 6% at higher oil prices, in an attempt to close the deal.
“This will provide 65 to 70 per cent of project value to the State or 52 to 54 per cent of nominal take,” it said.
“The State take has been independently verified by Deloitte in a comprehensive report commissioned by the Department of Petroleum and delivered to the minister this month.”
Twinza has kept its project team for Feed (front-end engineering and design) – readiness in the hope that the gas deal will be concluded by the end of 2020 after the negotiated terms were confirmed by Marape in September.
The Pasca A gas agreement reached this month would have required the project to enter the Feed process right away, with a final investment decision expected in 2022 and first production in 2025.
“Given the continued delays, Twinza will now stand down the Pasca Project team until there is clarity on terms and execution of the gas agreement.”
Chairman and chief executive Ian Munro said: “Twinza was awarded the Pasca license nearly 10 years ago as a foreign direct investor.
Since then, the firm has invested over K350 million in cultivating a field that was discovered more than 50 years ago but overlooked by other industry players.
“It is disappointing that at the closing stages of a drawn-out 10-month gas agreement process, the State is now seeking to again revise terms to ones that are demonstrably unacceptable to any investor.
“Consequently, while Twinza remains committed to progressing the Pasca A project on a fair and equitable basis, the company will streamline its costs while awaiting a gas agreement signing on acceptable terms.
“We remain focused on developing PNG’s first offshore oil and gas field and opening up the Gulf of Papua to much-needed investment as soon as circumstances allow.”
