Two-minute expert

The Papua LNG project

WHAT IS THE PAPUA LNG PROJECT?

On April 9, 2019, the PNG Government and French company Total signed the $US10 billion Papua LNG Project Gas Agreement, which, according to the government, will include the involvement of local businesses, have socioeconomic benefits for communities, and will add three percentage points to the country’s GDP.

WAIT… DIDN’ T THIS HAPPEN IN 2014?

That was the PNG LNG Project operated by ExxonMobil, an American company. This is the Papua LNG Project operated by Total, a French company. Though, ExxonMobil and its partner Oil Search are also partners in the new Total project.

THIS IS HAPPENING IN PORT MORES BY THEN ?

The project will supply gas from the Elk and Antelope onshore fields in Gulf Province to two new processing units that will be built at the current ExxonMobil plant just outside of Port Moresby. By expanding the current processing site the project will avoid unnecessary duplication of equipment and inflated costs.

OK, BUT IS THIS A GOOD DEAL FOR PNG?

In April, then Prime Minister, Peter O’Neill, told local media it was a “much better deal” as it includes an obligation to provide gas to the

domestic market at a fixed price, guaranteed tax revenues and a two per cent production levy. The state will have a 22.5 per cent stake in the project. The new Marape Government commenced a review of the gas agreement, which should be complete by the time you read this.

SO, IT’S NOT A GOOD DEAL?

The new government has been keen to ensure as much local benefit from the project as possible, without compromising the signed agreement. The project should trigger infrastructure development in Gulf Province. The project is expected to double PNG’s liquefied natural gas exports and boost the country’s position to sell gas into Asia’s booming economies.

WILL PAPUA NEW GUINEANS RECEIVE ANY DIRECT BENEFITS?

The project is supposed to create jobs for 20,000 people during construction, and the Government’s stake of 22.5 per cent includes a two per cent interest on behalf of landowners. Also, Wapu Sonk, managing director of Kumul Petroleum, the Government-owned company that protects the state’s interests in the deal, says that domestic gas needs will need to be supplied at competitive prices and the partners will have to give conditional access to pipelines to other gas developers to help ensure the country reaches its target of connecting 70 per cent of households to electricity by 2030. Currently, only 13 per cent of households have electricity.

GREAT, SO WHEN WILL THIS STAR T?

Well, the start-up date was supposed to be this year, but now it is expected construction will begin in 2021, and the first cargoes are expected to ship in 2024.

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