The LNG window is closing, warns Oil Search CEO

Welcome,

As Papua New Guinea awaits the outcome of ongoing negotiations over the P’nyang gas field, Peter Botten, CEO of PNG’s largest company, Oil Search, has hinted that time may be running out to reach an agreement.

Oil Search’s Peter Botten

‘PNG is very much at a pivotal point in collectively deciding on the next phase of development in the oil and gas sector,’ observed Botten, addressing an industry forum in Port Moresby last week. ‘The window is closing so we all have to decide what to do.’

The PNG State and the developers of the P’nyang field in Western Province – ExxonMobil and Oil Search – are currently attempting to negotiate a gas agreement to develop the field. Negotiations commenced in mid-November with a nominal deadline of 27 November, but are still ongoing, with Petroleum Minister Kerenga Kua expressing disappointment at their progress.

While the exact reasons for the impasse have not been made public, the developers have been keen to make a clear connection between P’nyang and the US$13 billion Total-led Papua LNG project, as the two projects will share infrastructure. The PNG Government, facing a large budget deficit, has stated a desire to achieve greater returns from P’nyang than from PNG’s first LNG project, PNG LNG.

Rewards

The rewards that can flow to Papua New Guinea if the negotiations can be concluded are considerable, as Botten pointed out.

‘Developing discovered resources at Papua LNG and P’nyang have the capability of almost doubling production from 2024-2025 onwards, with volumes sustained likely out past 2050.  These developments are initially likely to invest over US$13 billion – or K52 billion  – over the next 5 years, with more to come with the upstream development of P’nyang.

‘This will come with significant economic stimulation, new jobs, new wealth creation and stimulation for the PNG economy.

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Botten conceded too that ‘projects must address important social and economic issues, including provision of gas for local industry development, including power, full local participation in continued and ongoing related business and much better and more transparent benefits definition and distribution.

‘Considerable discussion and debate, some informed, some emotional, is taking place about what is a fair balance of rewards for all stakeholders in these projects.  I see this as absolutely understandable, given the history of each project and the need to put the resources sector, as a whole, into a complete strategy for the country that includes social, as well as economic development.  I fully support this review.

‘We are attempting to strike this balance on P’nyang right now.’

Real world

However, Botten issued a warning that the market for LNG was changing and PNG needed to act promptly to secure customers for its LNG.

‘The LNG markets that we are seeking are being filled, as other projects around the world are sanctioned. We were ahead of many two years ago, now we are coming towards the end of the queue, LNG prices are under pressure, as are construction costs.

‘We continue to lose value as things are delayed. We all want only the right project to go ahead, one that works for all stakeholders but we do live in a real world, where we don’t control some of the key pieces that will make any project here work.’

Comments

  1. Allan Wawah says

    Attracting foreign direct and domestic investments or doing business in PNG are challenging. Factors influencing sustainable business growth in PNG may be political, social, economic, ecological, legal and technological in nature.

    Maximizing benefits from the non-renewable sector for landowners, PNG governement, interested stakeholders and investors should be negotiated well and agreed during stakeholders MoA formulation and reviews.

    Benefits shared through MoA should be managed effectively and efficiently for sustainable growth in business and poverty reduction for landowners and PNG’s total population. We need to improve on this and contribute to the realisation of the PNG’s higher vision – rich black & christain nation globally.

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