Price level delaying projects

Business

By SHIRLEY MAULUDU
THE recent collapse in the liquefied natural gas (LNG) prices may delay some major petroleum projects, an official says.
Kumul Petroleum Holdings Ltd (KPHL) managing director Wapu Sonk told The National that the delay could take between 12 and 24 months.
“The LNG prices have been soft (dropping) in 2019 and continued to drop in early 2020 due to the oversupply in the market,” he said.
“The current spot market prices of below US$2 (K6.70) per mmbtu (one million British thermal units) in LNG prices recently is a result of the Covid-19 pandemic which has impacted the demand for LNG.
“Coupled with the drop in demand has been the drop in oil prices where WTI (West Texas Intermediate – a grade of crude oil used as a benchmark in oil pricing) future price hit below zero, at negative (-US$37 (-K124.23/bbls). Oil prices have recovered up to US$30 (K100.72)/bbl (barrels) for brent crude, but this is still 50 per cent lower than where the price was late 2019.
“The LNG and oil price collapse has a huge impact on Kumul Petroleum Holdings Ltd revenue, its ability to pay dividend, tax etc to the State.
“And all the joint venture partners in PNG LNG project face the same challenges for 2020 financial year.
“The collapse in prices also affect the timing of when Papua LNG, P’nyang, Pasca or any other petroleum development projects as most of these capital intensive projects only get funded when there is demand and market for the product.”
Sonk said in the long term, “the window of opportunity for LNG market that Papua LNG and P’nyang were targeting remained but delayed by maybe two years (2027 onwards)”.

One thought on “Price level delaying projects

  • Drop in economic condition should not affect payment of taxes. It will only affect overhead expenditures and profit margin. Taxes should be ‘pay as you earn’. Don’t mix things up.

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