State getting 63pc share in project

The National Business
The government and project developer ExxonMobil Ltd had signed the P’nyang gas agreement on Tuesday.  The State would receive up to 63 per cent of revenue on average from the project. Business reporter  DALE LUMA writes about the project deal and its benefits.

THE country is to receive up to 63 per cent of revenue on average during the life of the P’nyang liquefied natural gas (LNG) project.
The P’nyang gas agreement was signed on Tuesday between the State and the project developer ExxonMobil PNG Ltd with its affiliates.
The construction phase will begin after the completion of the Papua LNG construction phase, sometime around 2028.
With a capital investment of around US$9 billion (K30 billion) in the project in Western, it will be worth around US$44 billion (K151 billion) once up and running, according to Prime Minister James Marape.

P’nyang LNG project landowners with ExxonMobil PNG Ltd managing director Peter Laden outside Government House after the signing of the gas agreement on Tuesday.

Project agreement
The gas agreement signed on Tuesday comes after two years and three months of negotiations.
The Government’s main aim for all projects in the country is to gain higher returns – anywhere between 60 per cent and 65 per cent.
Government acknowledges that different projects have different models in as far as cost structure and rate of returns is concerned in which in this case, Exxon.
Both the State and developer ExxonMobil PNG Ltd have found what was described as a soft spot in reaching an agreement with maximised benefits to all stakeholders.
Marape said the State was able to bargain and push hard during negotiations.
The deal was struck also considering the shift in the energy space with the world moving towards green energy.
With the agreement in place, construction of new upstream facilities in Western and linked to existing infrastructure will take place. The agreement is sequenced consistent with the construction of the Papua LNG which will possibly start construction around 2024/2025.
This ensures that after the construction of the Papua LNG, P’nyang LNG construction will begin.
The Government had initially intended for the P’nyang project to be a standalone project but has done a complete circle on the proposed arrangement.
The project will be linked to the PNG LNG project through existing infrastructures.
This, according to the Government, technically gives the country gas producing ability up to 2050/2060, extending the country’s life being a gas-producing nation.
Exxon has also indicated that as it engages on feed, as the pipeline runs, there will be t-joints in certain specific strategic interventions to ensure that in the future, if exploration finds gas, these can be mobilised continuing sustained value to the economy over a long time instead of aggregating resources quickly and depleting gas much earlier.

Benefits
The country is to benefit from eight years of consistent construction activity which in the Governments view, will have a positive effect on the economy in a very big way.
Government believes this is smart project sequencing which the country was able to pick up together.
In the agreement, the State has secured 34.5 per cent equity shares in the project with other headline gains such as a:

  • THREE per cent production levy compared to Papua with no production levy;
  • BETTER calculations in royalty and equity compared to PNG LNG which has more deductions;
  • FIVE per cent of gas for domestic market use;
  • ADVANCE on tax credit project with an envelope of K150 million in early works; and,
  • ACTUAL earnings from gas will flow in about 2032 or 2033 thereabouts.

All in all, the State has secured returns within the range of 60 per cent to 65 per cent Government take in the P’nyang deal.
The deal ensures that the country which includes all parties will pick in the first instance at 59 per cent and into the life of the project average to 63 per cent full stake of total revenue generated form the project.
The Government believes in getting higher returns from resource projects to ensure that the rural areas which the project sites are located get service delivery.

Prime Minister James Marape outside Government House with some landowners of the P’nyang LNG project in Western after the gas agreement was signed on Tuesday. – Nationalpics by KENNEDY BANI

P’nyang gas field
According to ExxonMobil PNG Ltd, the P’nyang gas field is located within Petroleum Retention License Three, which covers 105,000 acres (425 square kilometers).
The field is estimated to have 4.36 trillion cubic feet of gas.
Esso PNG P’nyang Ltd, a subsidiary of Exxon Mobil Corporation, operates the license and with Ampolex (PNG) Ltd, has 49 per cent interest.
Affiliates of Santos and JX Nippon have a 38.5 per cent interest and 12.5 per cent interest respectively.