PNG PM Marape Certain P'NANG Gas Project will Get off the ground

The Papua New Guinea  will continue to make additional concessions for an acceptable pathway to all parties to get the US$9.2 billion P’nyang gas project off the ground.

Prime Minister James Marape, when giving an update on the status of the project, said he has written to the ExxonMobil chairman and chief executive officer Darren Wood, making a case and at the same time, making additional concessions.

“The chairman has responded positively, indicating that they understand the position of the government and that they will respond after their consultations with other joint venture partners have concluded,” Mr Marape said.

“I am hopeful that both parties can find a mutually acceptable pathway when we re-engage, as a no-deal will have far-reaching consequences for both parties.”

The P’nyang gas project is located in Western and currently owned by ExxonMobil and Oil Search Limited.

The project retention licence (PRL) expired in August 2016, and is preserved by the lodgment of an application for a petroleum development licence (APDL) with the Department of Petroleum and Energy.

The total cost of the project of estimated at US$9.2 billion and is expected to generate a (pre-tax) cashflow of US$23.3 billion over a period of 20 years.

Mr Marape said government agencies, under the guidance of the State negotiating team, completed the technical, environment and financial assessments in late 2019.

Their findings and State term sheets were endorsed by Cabinet, which directed the team to commence formal negotiations.

Mr Marape said the State term sheet included corporate tax at 30 per cent; production levy at 10 per cent; royalty and development levy at 2 per cent FOB, no dilution; 5 per cent import duty; social levy at 2 per cent; 10 per cent gas for DMO (domestic market obligation) at a discounted price, not market price; 2 per cent fiscal stability; additional equity for Western; funding for early community obligations; 15 per cent withholding taxes and no foreign exchange exemptions;.

“National content packages, including shipping and ownership of the pipeline are also part of the State term sheet.

“The terms were developed on the basis of the government’s policy mandate, which I outlined earlier – and it is fundamental to achieving a fair and equitable share,” Mr Marape said.

“I regret to report that negotiations broke down in late January 2020, due to dissatisfaction over ExxonMobil’s insistence for similar fiscal terms under the PNG LNG Project.

“This was despite the State negotiating team making 13 concessions from the 27 items in the State term sheet.”

But Mr Marape said the government was confident that the project would go ahead.

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