Total and its partners ExxonMobil and Oil Search, based in Papua New Guinea, have signed a gas agreement with the independent state of Papua New Guinea (PNG) that sets the fiscal framework for the Papua New Guinea LNG project, Total announced on Tuesday. The government of Papua New Guinea has suspended negotiations with ExxonMobil for a gas deal for the planned development of the P`nyang gas field in the country`s western highlands. The Papua LNG gas deal is one of two agreements that Total and its partners Exxon Mobil Corp and Oil Search Ltd need to advance the LNG expansion plan. Kua said the government has the option to postpone the P`nyang project until the new oil and gas legislation and revised tax regime are put in place this year. Nevertheless, he said it was more advantageous to have the P`nyang gas agreement negotiated and signed under the 1998 oil and gas law. Tuesday`s agreement allows the partners to enter the FEED phase of the study that will lead to the final investment decision in 2020. Prime Minister Peter O`Neill said Friday in Port Moresby, the capital, that “physical conditions” had been agreed. He said negotiations over how revenues would be distributed across the municipality and provincial governments required more work. “I would say we`re already at about 50 to 60 percent of our understanding of revenue participation,” O`Neill said in response to questions from Reuters. A non-binding memorandum of understanding (MOU) signed on Friday is essentially a commitment by the government to conclude a gas agreement in early 2019 that would lead to the development of Papua LNG operated by Total. The MoU was signed at the Asia Pacific Economic Conference (APEC) in Port Moresby, in the presence of Peter O`Neill, Prime Minister of Papua New Guinea, and Patrick Pouyanné, Chairman and Chief Executive Officer of Total.

The draft gas agreement is expected to be finalized by Q1 2019. Total is the operator of the Elk and Antelope onshore fields and, with a 31.1% stake, the main shareholder of PRL-15, with its partners ExxonMobil (28.3%) and Oil Search (17.7%), according to state law of 22.5%. The Papua LNG project will comprise two LNG trains of 2.7 MMtpy each and will be developed in synergy with existing LNG facilities (operated by ExxonMobil). Total and its partners have agreed to launch the first phase of the technical studies for this project. “The Memorandum of Understanding signed by PNG and the Papua LNG project partners is an important step in the commitment of all parties to the project,” said Patrick Pouyanné, Chairman and Chief Executive Officer of Total. “Investing in LNG is a long-term undertaking and our goal is to make the project as competitive as possible. As the second largest private LNG player in the world, we are fully committed to the success of the Papua LNG project, which enjoys a favourable geographical location close to Asian markets. Shares of Oil Search, which have fallen in the past three months due to uncertainty surrounding gas deals, closed 2.1% higher shortly after the government`s announcement in a broader flat market. Papua LNG is also facing a wave of global competitors who, in the mid-2020s, are yearning for an expected increase in LNG demand, which may or may not occur. “A P`nyang gas deal remains a precursor to the entire LNG expansion project, which is competing for a rapid market opening over this decade,” Kavonic said. The P`nyang gas field development proposal calls for the construction of a third LNG train at the PNG LNG project plant at Caution Bay, near Port Moresby, but which will be treated as an integrated autonomous gas project under the terms of a gas agreement. . .

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