PNG, Exxon 'moving towards' LNG deal

The Papua New Guinea government has signalled that negotiations with ExxonMobil on the terms of a $20 billion LNG expansion are inching towards a resolution, but has made it clear it won't back down on a deadline for the development of a major gas field.

Talks between the government's negotiating team and Exxon are understood to be taking place in Sydney this week after discussions last week in Singapore appeared to have made little progress.

However, a spokesman for the negotiating team said on Thursday that talks "are ongoing and are moving towards a deal".

"What is essential to PNG is to develop the P’nyang field in a timely fashion, on terms similar to other developing nations," he said, referring to the gas field in the PNG Highlands that would supply an expansion of the Exxon-led PNG LNG venture in which Oil Search and Santos have stakes.

"We need a good deal, not a fast deal."

PNG's relatively new government led by James Marape has taken a much tougher line on the terms of resource development, promising his people that more benefits would flow to the economy and communities.

While the terms agreed in an earlier deal are said by Credit Suisse analyst Saul Kavonic to still be generous for Exxon and its partners, the U.S major has resisted changes to terms.

The stand-off has delayed progress at the whole $20 billion LNG expansion, which also involves the Papua LNG project led by Total.

The gas agreement for P'nyang had been targeted for earlier last year, then by the year-end, with 31 January the latest deadline set by Exxon.

The spokesman reiterated that the government is standing firm on key aspects it wants included. That includes a commitment on the timing for the development of P'nyang so the resource is not set aside by the oil majors for commercialisation at a later date.

"The Prime Minister has made it abundantly clear that every new development must have better terms for PNG than those struck for previous projects," he said.

"A timeline for development is also a fundamental condition for any agreement, so we can be certain the field will be developed as soon as possible and make sure the fields are not warehoused."

The spokesman said the deal also needed to ensure that the project maximises the potential in the Western Province, where P'nyang is located.

"We are pleased at the developer’s participation and commitment to resolve these issues, so we can achieve a mutually beneficial outcome," he added.

An Exxon spokesman said only that discussions with the government were "ongoing".

Santos chief executive Kevin Gallagher wouldn't estimate when a deal may be done but said that "everybody is working hard to bring it together in the first part of this year".

"I am still very confident that it will all come together in the end," he said. "I think there is a willingness to reach a workable conclusion, said Gallagher.



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