The Papua New Guinea Government has reportedly pulled the plug on negotiations with ExxonMobil in regards to developing the P’nyang gas project following the company’s “unwillingness to agree to reasonable terms”.
The P’nyang field was key to helping feed the expansion of Exxon’s PNG LNG plant, which it operates alongside joint venture partners Oil Search and Santos.
ExxonMobil’s proposed development of P’nyang, along with the Papua LNG project was expected to generate $13 billion in investment in PNG gas and double the country’s LNG exports by 2024.
Oil Search has expressed its disappointment about Exxon and PNG being unable to agree on the appropriate balance of value and benefits for a gas agreement.
“Oil Search respects the PNG Government’s right to set fiscal terms for resources developments in PNG, to ensure the state, resource owners and the people of Papua New Guinea receive an appropriate share of value from these projects,” Oil Search managing director Peter Botten said.
“Under the terms proposed by the state, the joint venture partners were unable to obtain a return on their investment that made the project investable and bankable.”
Botten said that the company would still continue a dialogue with the PNG Government on the P’nyang field to achieve the appropriate balance of risk and reward for stakeholders.
PNG Prime Minister James Marape said he was willing to allow international oil companies to develop the field and achieve decent return by exporting most of the gas, but PNG must also benefit.
“It is hugely disappointing that our negotiation partners will not agree to such terms,” Marape said. “Our position has not, and will not, change. Naturally, every new project must build on previous projects with improved terms for PNG, particularly when the initial terms provided by PNG were so generous. That is a normal progression in nations as successive projects are approved and developed.
“In reality the only progress made by Exxon Mobil over the last three months was on fundamental issues underpinning such agreements that would usually not be contentious, such as: agreeing to put milestones in place to ensure P’nyang is actually developed and not warehoused by Exxon Mobil and its partners.”
The PM said PNG continued to welcome international investment was “keen to work with global partners as it further develop its nation.