THE National Government would be required under the proposed project agreement on the second liquefied natural gas (LNG) project to help obtain additional gas supply if gas reserves in the upstream project proved inadequate.
It was also suggested that the Government should also consider as one of the options to invite a strategic partner (possibly an oil/gas major) to lead the funding arrangements for the State’s upstream equity participation of 22.5% (State 20.5% and landowners 2%) and pipeline/plant project participation (12%) subject to favourable terms and conditions.
The Government is being offered 10% interest in the LNG plant.
This was disclosed in the final draft of the project agreement submitted to the Department of Petroleum and Energy recently by developer InterOil Corp through its subsidiary Liquid Niugini Gas Ltd (LNGL).
The draft agreement also disclosed that the front-end engineering and design (FEED) would start 30 days after a project agreement has been signed.
The project shareholders have committed US$400 million (about K1.1 billion) to fund the FEED.
LNGL negotiated the FEED with Bechtel in December 2007 and has been ready to start FEED since January last year.
“LNGL will execute a FEED contract within 30 days of an executed project agreement with the State.
“The State is not required to fund the FEED phase until it assesses the project at the end of FEED stage,” LNGL said in the draft agreement.
It was learnt from the draft agreement that there was an absence of independent verification of potential gas reserves, the very thing that DPE had requested for the developer to provide before a project agreement could be signed.
LNGL had also scrapped a proposal to request for a 10-year tax holiday, as this was not offered to Esso Highlands Ltd, subsidiary of ExxonMobil, which is developing the first LNG project.