Total, Exxon, Oil Search Sign PNG Gas Deal

Total, operator of the Papua LNG project, ExxonMobil and Oil Search have signed a gas agreement with the government of Papua New Guinea, defining the fiscal framework for the project, Oil Search said April 9.

In 2018, a memorandum of understanding was signed between Papua LNG and the PNG government, setting key terms and conditions for a gas agreement.

“This is a major milestone for the Papua LNG project. We believe the fiscal and other terms of the gas agreement equitably allocate project benefits and returns to the state, the project participants and other stakeholders,” said Oil Search managing director Peter Botten.

The agreement includes a Domestic Market Obligation (DMO), which will provide gas for sustainable future domestic usage, a deferred payment mechanism for the state’s payment of past costs, easing the financial burden associated with the acquisition of its equity interest in the Papua LNG project and a national content to support local workforce development, Oil Search said.

The signing of this agreement will now allow all Papua LNG project parties to proceed with the front end engineering and design (Feed) related activities, commencing with contractor selection and engineering contracting.

Oil Search said its focus will now move to working with PRL 3 operator, ExxonMobil, and the state to close out an agreement for the development of the P’nyang field and the commencement of the Feed phase for the proposed three-train integrated development at the PNG LNG plant site.

“This will also include Feed for the Associated Gas Expansion (AGX) project, operated by Oil Search. Feed is expected to result in a final investment decision in 2020, which will ensure that first production from our new, globally competitive, LNG trains is available in 2024,” it said.

The Papua LNG project will encompass two LNG trains of 2.7mn mt/yr each and will be developed in synergy with the existing PNG LNG project facilities, operated by US major ExxonMobil.