PAPUA NEW GUINEA

PNG to resume talks on P’nyang gas project

Angela Macdonald-Smith

Senior resources writer
Aug 23, 2021 – 2.57pm

ExxonMobil has advised of movement in the stalemate with the Papua New Guinea government over the development of a major natural gas field in further evidence of a thawing in the chilly investment climate for resources development under James Marape’s government.

The US energy giant’s managing director in PNG, Peter Larden, and PNG petroleum minister Kerenga Kua jointly announced they intend to re-engage in talks towards an agreement that would set out the terms for the development of the P’nyang field.

PNG Petroleum Minister Kerenga Kua said that the P’nyang and Papua gas projects could be developed over an eight-year period. Supplied

ASX-listed Oil Search, a partner in the field, described the announcement as “a positive step” towards the development of the gas resource held by the PRL3 joint venture.

Oil Search executive vice-president commercial Diego Fettweis said it “signals the strength of support between the PRL3 joint venture and the Government of Papua New Guinea for a mutually beneficial outcome”.

The news comes after Newcrest last week said negotiations had restarted with the PNG government over a special mining lease for the gold miner’s long-delayed Wafi-Golpu copper and gold project in the highlands region.


Talks on P’nyang gas, which is intended to supply Exxon’s PNG LNG venture, have been stalled since early February last year when the government and Exxon could not agree on terms for the development of the field after months of negotiations. Mr Marape had been looking to put in place improved terms for the expansion of the PNG LNG venture that would have provided more benefits for the nation but Exxon baulked.

The project was in any case put on hold in March last year after the crude oil price crashed, and Oil Search and France’s TotalEnergies have since continued to progress the Papua LNG project alone, rather than as a part of a broader LNG expansion that would have included P’nyang.

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Now the PNG government is aiming to sign an initial agreement for the development of P’nyang “around the end of this next month”, followed by a formal Gas Agreement for the project, petroleum minister Kerenga Kua said.

Credit Suisse energy analyst Saul Kavonic was still downbeat about the prospects for real progress towards the development of P’nyang.

“We don’t hold our breath, given similar deadlines in the past have slipped (and may be driven more by local politics than substance), although Exxon’s co-authoring lends the announcement more credence,” Mr Kavonic said.

He said that in any case, he doubted that a deal would bring an expansion of PNG LNG back onto the table, saying P’nyang gas is more likely to be used for “backfill” gas for the existing two-train LNG project once existing gas supplies start to decline. Gas from P’nyang could displace a field such as Juha which appears unviable despite being included in proven and probable reserves,” he said.

Still, Mr Larden said the intent to develop the P’nyang gas field “helps demonstrate the encouraging growth opportunities for our operations in PNG” while Mr Kua underscored the benefits of phasing the construction of the Papua and P’nyang gas projects over an eight-year period.

Separately, Santos made progress towards development of its $US2 billion Dorado oil project in Western Australia, awarding a contract for initial engineering and design of an offshore production ship to Altera Infrastructure. Santos and partner Carnarvon Petroleum decided in June to start front-end engineering and design work for the project, which is targeted for a final go-ahead for construction in mid-2022.

Angela Macdonald-Smith writes on the resources industry with a focus on energy, including gas, oil, electricity and renewables. Connect with Angela on Twitter. Email Angela at amacdonald-smith@afr.com