The Government of Papua New Guinea (PNG), Hevehe Petroleum, and Twinza Oil have signed the Pasca Gas Agreement, marking the country’s first offshore petroleum project. This landmark deal promises significant economic and social benefits.
Historic Signing Ceremony
The signing ceremony, led by Governor General Sir Bob Dadae and attended by Prime Minister Hon. James Marape, senior ministers, and key stakeholders, took place on December 19, 2024, at the Government House in Port Moresby.
Prime Minister Marape hailed the agreement as a transformative milestone, emphasizing its potential to benefit landowners and the Gulf Province.
“This agreement secures better terms for PNG while fostering a stable environment for our project partners,” Marape said.
Swift Negotiations Yield Results
Negotiations were completed within six months after MRDC’s acquisition of an equity stake in the Pasca project. The agreement secures a 70% state take, one of the most favorable in PNG’s history. It includes:
- State Equity: 22.5% equity stake
- Taxes: 30% corporate tax and a 15% additional profits tax
- Levies: 2% royalty, 2% development levy, and 3% production levy
A Domestic Market Obligation (DMO) mandates 5% of production for local use at favorable prices. Twinza Oil will also deposit USD 20 million into the Bank of Papua New Guinea to stabilize foreign exchange reserves.
Focus on Local Participation
The Pasca Joint Venture involves MRDC, the Gulf Provincial Government, and other stakeholders. It targets 80% local workforce participation within five years and 25% involvement of locally owned businesses.
The agreement prioritizes national content, sustainable practices, and human rights, Minister for Petroleum Hon. Jimmy Maladina said, adding the project’s benefits will flow directly to the people, contributing to national development.
“This agreement reflects our commitment to ensuring PNG’s resources drive prosperity for our nation,” he said.
Phased Development
The project will be developed in two phases:
Phase 1: Focus on liquid petroleum production, with an estimated 135 million barrels of oil equivalent.
Phase 2: Transition to liquefied natural gas (LNG) production, with an estimated 115 million barrels of oil equivalent.
The Joint Venture Agreement will be finalized within 90 days, followed by securing the Petroleum Development License (PDL) and Final Investment Decision (FID).
Key Highlights
- Efficient Negotiation: Collaboration among Hevehe Petroleum, MRDC, and Twinza Oil accelerated the process.
- Government Revenue: PNG will receive 70% of the project’s value through taxes, royalties, and levies.
- Equity Participation: Hevehe Petroleum holds a 50% interest, empowering landowners and provincial governments.
- Safeguards: New measures ensure transparency and prevent license misuse.
- Improved Returns: A revised wellhead value formula benefits PNG by limiting deductible expenses.
Benefits to Gulf Province
The Gulf Provincial Government holds 10% equity in Hevehe Petroleum and benefits from levies and royalties.
Governor Hon. Sir Christopher Haiveta stated, “The entire Gulf Province will benefit directly from this project. This is a testament to making things happen for our people.”
MRDC played a pivotal role in securing favorable terms, leveraging decades of experience to ensure equitable outcomes.
The Pasca project sets a benchmark for future offshore developments, empowering landowners and provincial governments to shape PNG’s resource future.
Prime Minister Marape concluded, “This milestone lays the foundation for sustainable development and inclusive growth in PNG’s resource sector.”
