PNG Government Gives Go-Ahead for Papua LNG Project

The PNG Government announced that has cleared Total, the Papua LNG Project operator, to proceed “full steam ahead” with the implementation of the $20 billion Papua LNG Project.

PNG’s Minister for Petroleum, Kerenga Kua, made the announcement following months of uncertainty due to political changes in the nation. The initial deal, signed in April this year, involves three LNG trains fed by over one billion boe of gas.

The PRL 15 Joint Venture, consisting of Total, ExxonMobil and Oil Search, will now work collaboratively with the government on finalizing the National Content Plan for the Papua LNG Project. 

Oil Search will also focus on an agreement for the development of the P’nyang gas field and commencement of FEED-related activities for the proposed three-train development, including FEED for the Associated Gas Expansion Project, operated by Oil Search. The P’nyang field development is expected to leverage existing PNG LNG Project infrastructure. 

Total as agreed to provide third party access to the petroleum pipeline, the potential for the government to take a stake in the pipeline and the formation of a joint venture with national oil company Kumul to evaluate a shipping operation.

Wood Mackenzie senior analyst David Low says it's good news for the Papua LNG JV but warns on the new production sharing agreement touted by the government. “We believe that the PNG Expansion FEED scope - which will include PNG LNG Train 3 and the P’nyang gas development – will also require a signed P'nyang Gas agreement to proceed with FEED works. The newly proposed production sharing agreement regime, which was an unexpected step from the PNG government, increases the timing uncertainty around the completion of this agreement as new fiscal terms have to be negotiated for future upstream developments.

“Implementing a new production sharing agreement from scratch that meets the needs of all stakeholders will probably take time. The impact on the FEED entry timeline could range from brief to up to a one-year delay. This will be dependent on how advanced the state is with developing its new fiscal framework.”