Photo credit: Santos Ltd.
Prime Minister Hon. James Marape, MP has announced that his Cabinet has cleared the P’nyang Gas Agreement, which now awaits signing between the State and ExxonMobil who is the lead project developer of the Petroleum Retention License (PRL) 3.
The Prime Minister said: "When I took office in mid-2019, I committed to the nation better results from resource projects we were going to undertake under my watch and today let me thank ExxonMobil for responding positively to our State’s position to earn more from our country’s national resources.
"We started a protracted negotiation that included detaching P’nyang from Papua LNG terms and moving onto a separate template to gain more for the State but at the same time giving respect to our investors' return on their investments.
“After almost two years of exchanges, I think we have found the sweet spot where investors will be happy and we the PNG beneficiaries including Western Provincial Government and Landowners will be happy.”
The Cabinet meeting approved the gas agreement, which has the following unique features comparative to both PNG LNG and Papua LNG project agreements that the State Negotiation Team led by Chairman Dairi Vele successfully negotiated under Minister Hon. Kerenga Kua’s guide.
- Total state equity to be at 34.5% over and above the 22.5% allowed by oil and gas act, with ExxonMobil to offload 12% of their stake at fair market price to PNG parties of which PM has committed to offload most to Western Province and Landowners. Comparatively in PNGLNG we only have 19.6% and Papua LNG, the O’Neill Government signed up to only 22.5% as required by Law;
- Corrected the definitions of “well head value “of Royalty, Equity and Development Levy so that deductions only feature cost of harvesting the resources unlike present definition in both PNGLNG and Papua LNG;
- Secured additional production levy at 3% not given in PNGLNG project and Papua LNG is at 2%;
- Secured 5% of total gas domestic use at much cheaper price than Papua LNG’s DMO, a far bigger improvement from PNGLNG;
- No tax concessions except the increase on amortization cost and time period that will see PNG picking tax benefits in the later life of the project;
- License to develop is to be sequenced with Papua LNG construction where our country will see increase benefits to the economy with both Papua LNG and P’nyang LNG sequenced to construction from 2024 to 2032 instead of just four years for Papua LNG;
- With P’nyang coming on board, it means that PNG will be a gas producing nation up to 2060 and PNGLNG beneficiaries will collect toll revenue from P’nyang LNG in the period they are in production;
- The P’nyang infrastructure will have capacity to upload other third party stranded gas in Western, Hela and SHP into the future;
- The total project economic gain for PNG sits at 59% and with adjustments to the life of the project. It will rest at 63% all within the Marape-Basil Government mandate that SNT had used for the negotiations. PNG should note that in PNGLNG we are gaining at 49% and Papua LNG at 51% so above 59% to 63% is an all-time high for our country.
PM Marape commended ExxonMobil for understanding PNG's aspirations by choosing to remain committed to unbundle the 4.4 TCF of gas that, if not developed, would remain in the foothills of our country’s hinterland.
More details will be made when the gas agreement is signed next week Tuesday at the Parliament’s State Function room, the Prime Minister said.
On a related matter, Prime Minister Marape mentioned Santos Ltd’s positive indications of additional equity in the PNGLNG project, based on his request to Santos if they offload equity in PNGLNG as a result of their acquisition of Oil Search assets.
The Prime Minister commended Santos CEO Mr Kevin Gallagher for the good indications thus far saying this should recompense PNG parties in PNGLNG for dilution of their interest to only 19.6% instead of the 22.5% required by law.
Article courtesy of the Department of Prime Minister & National Executive Council
