US$100m demand for gas project in PNG

It has emerged that the State negotiating team for the US$11 billion P’Nyang gas project is demanding a US$100 million “success fee” for the granting of a project development licence.

That is one of the terms and conditions that will be put on the table when the State negotiations team starts talks with developer ExxonMobil this week.

The details where the US$100 million will go are a mystery. Sources in the private sector said it appeared unethical for highly-paid government employees to demand a “success fee” when State legislation requires such negotiations to be part of their job.

They said suspicions had been further raised because the SNT, which is headed by the Chief Secretary, Isaac Lupari, had insisted in their “draft term sheet” that the success fee would not be allowed as a tax deduction.

Any agreement by ExxonMobil to make such a payment could land company executives in jail in the United States because of tough anti-corruption laws in that country.

“This success fee has to come from somewhere if it is not part of the project cost,” sources said, adding: “This clause alone would be enough to kill off this project, along with the Papua LNG Project.”

The terms related to the “success fee” and the granting of the PDL have been sighted by the Post-Courier, along with additional milestone payments.

Minister for Petroleum Kerenga Kua said in a statement that the Prime Minister was now satisfied that the negotiations could now begin between the State and the developer of the P’nyang gas project, ExxonMobil.

 “I am pleased to see the project being progressed and I commend the State negotiating team for developing the plan (terms and conditions) that they presented to the P’nyang ministerial committee.”

He said the committee consisting of relevant economic ministers had deliberated on these terms and conditions and then it was endorsed.

Kua did not outline the terms and conditions in his media statement, but the Post-Courier was reliably informed that under the terms the FEED completion by 30 June, 2022, the participants would also be penalised for any delays in the project, which is US$5 million a month in respect to the FEED milestone and US$10 million a month in respect of the project sanction (FID) milestone. In addition, failure to achieve a milestone by 24 months after the relevant milestone dates would result in the gas agreement automatically terminating and the APDL automatically cancelled.

Sources familiar with the industry said most of the terms and conditions that would be put on the negotiating table are non compliant to the PNG laws.


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