Total's Papua LNG Project: MoU with state to finalize Gas Agreement, start first phase engineering studies

A long-awaited project led by France’s Total SA that will help double LNG exports from Papua New Guinea has come another step closer, with the government agreeing to set financial terms early next year. 

The LNG expansion, which analysts estimate will cost $13 billion, is crucial to the Pacific island nation’s economy as LNG is its biggest export earner, while demand for the fuel is surging in international energy markets.

The Papua LNG Project will encompass two LNG trains of 2.7 MMtpy each and will be developed in synergy with the existing PNG LNG facilities. (Map Source: EWA)

Prime Minister Peter O’Neill said in the country’s capital of Port Moresby on Friday that “physical terms” had been agreed. He said negotiations over how revenue would be shared in the community and provincial governments required more work.

“I’d say we are almost 50 to 60 percent through already about our understanding of revenue sharing,” O’Neill said, in response to questions from Reuters.

Disagreements over land-owner rights and revenue-sharing agreements have been an almost constant feature of resource development in PNG.

A non-binding memorandum of understanding (MOU) signed on Friday is basically a commitment by the government to finalise a gas agreement in early 2019, which would lead to the development of Papua LNG, run by Total. 

The MoU was signed during the Asia Pacific Economic Conference (APEC) in Port Moresby, in presence of Peter O’Neill, Prime Minister of Papua New Guinea, and Patrick Pouyanné, Chairman and CEO of Total. The proposed Gas Agreement is expected to be finalized by Q1 2019.

Total is the operator of the Elk and Antelope onshore fields, and is the largest shareholder in PRL-15 with a 31.1% interest, alongside partners ExxonMobil (28.3%) and Oil Search (17.7%), post the State back-in right of 22.5%. 

The Papua LNG Project will encompass two LNG trains of 2.7 MMtpy each and will be developed in synergy with the existing PNG LNG facilities (operated by ExxonMobil). Total and its partners have agreed to launch the first phase of the engineering studies of this project.

“The MoU signed by the State of PNG and the partners of the Papua LNG project is an important step in all the parties' commitment to the project”, said Patrick Pouyanné, Chairman and CEO of Total. “Investing in LNG is a long term enterprise and our objective is to be able to make the project as competitive as possible. Total being the second-largest world private LNG player, we are fully committed to the success of the Papua LNG project, which benefits from a favorable geographical location close to Asian markets.”

Sources: Reuters, Total SA

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