Govt raises demand on gas deal

THE Government has increased its demand on the Pasca A Gas agreement yet again, ahead of the scheduled signing today, according to project operator Twinza Oil Ltd.
According to a statement from Twinza, the Government informed the company last Friday that it now required a 6 per cent production levy to sign the agreement.
It read: “This is 4 per cent higher than the production levy that was agreed as part of the comprehensive terms (agreed terms) for Pasca A, negotiated by the state negotiating team and announced by the Prime Minister James Marape last Sept 24.
“The additional levy requested would make the Pasca A project un-financeable for any investor.
“The agreed terms would have delivered the highest State take from any resource development in PNG and were widely regarded as meeting all of the demands of the State, including early revenues, full royalty and development levy entitlement and a domestic market obligation of 5 to 10 per cent, while satisfying the requirements of project financiers.”
It said the State had also sought to change the agreed terms via a letter from the Petroleum Minister Kerenga Kua on Feb 4.
“The Government’s demand to raise the fiscal take to (between) 55 and 60 per cent nominal share, which is 75 to 85 per cent of the actual project value, would make Pasca A unviable for investors and financiers alike,” it said.
“Notwithstanding the changing State positions, Twinza remains committed to PNG and progressing the Pasca A Project on the agreed terms.”
In an effort to close-out the agreement, Twinza offered an additional concession to the agreed terms, to increase the production levy to 4 per cent, with a further increase to 6 per cent at higher oil prices.
“This will provide 65 to 70 per cent of project value to the State or 52 to 54 per cent of nominal take,” it said.
“The State take has been independently verified by Deloitte in a comprehensive report commissioned by the Department of Petroleum and delivered to the minister this month.”
In expectation that the gas agreement would be signed by the end of 2020 after the agreed terms were announced in September by Marape, Twinza has maintained its project team for Feed (front-end engineering and design) – readiness.

The signing of the Pasca A gas agreement this month would have allowed the project to immediately move into the Feed phase, with a final investment decision in 2022 and first production in 2025.
“Given the continued delays, Twinza will now stand-down the Pasca Project team until there is clarity on terms and execution of the gas agreement.”
Chairman and chief executive Ian Munro said: “Twinza was awarded the Pasca license nearly 10 years ago as a foreign direct investor.
And since this time, the company has spent more than K350 million in developing a field that was discovered over 50 years ago and passed over by other industry players.
“It is disappointing that at the closing stages of a drawn-out 10-month gas agreement process, the State is now seeking to again revise terms to ones that are demonstrably unacceptable to any investor.
“Consequently, while Twinza remains committed to progressing the Pasca A project on a fair and equitable basis, the company will streamline its costs while awaiting a gas agreement signing on acceptable terms.
“We remain focused on developing PNG’s first offshore oil and gas field and opening up the Gulf of Papua to much needed investment as soon as circumstances allow.”

Twinza’s principal asset is the Pasca A liquids-rich gas field.
According to the company, the Pasca A field development plan has been completed, the petroleum resources certified and the programme necessary to obtain the licences for full field development is complete.
Once the necessary government approvals have been received, the Pasca A development will become the first offshore field development in Papua New Guinea.
It is anticipated that development of the field will support further exploration and development of other fields in the Gulf of Papua.
The Pasca A gas condensate field, is 85 km from the shores of Gulf and within the exclusive economic zone.