After the stalling of previous talks, ExxonMobil and the Papua New Guinea government have announced negotiations are recommencing for the P’nyang gas project.

Hides Gas Conditioning Plant. Credit ExxonMobil

The wait could be finally over for P’nyang, the potential gas project in Western Province that sits about 130 km northwest of the Hides gas field which supplies the ExxonMobil-led PNG LNG Project.

The progress of P’nyang (PRL3) has been stalled since February 2020, when negotiations between PNG and ExxonMobil ceased without agreement.

Last Friday, however, the Minister for Petroleum, Kerenga Kua, and ExxonMobil PNG’s Managing Director, Peter Larden, signed a letter of intent to demonstrate both parties were ready to go back to the negotiation table.

‘This time we intend on making sure that we cross the line and bring all good faith and sincerity to the negotiations to enable us to reach some terms and conditions that are satisfactory to both sides so that the project can happen for all our mutual benefit,’ Kua is reported as saying.

Kua said that there would be a series of workshops about development within the next weeks, and that he is ‘optimistic’ an agreement could be signed by the end of September.

‘If all goes well, we can expect to sign a P’nyang Heads of Agreement around the end of this month and a Gas Agreement thereafter.’

ExxonMobil’s Peter Larden said that he was looking forward to progressing the discussions.

Oil Search, one of ExxonMobil’s partners in P’nyang and also in the PNG LNG project, also confirmed to shareholders that Exxon and PNG are intending to reengage in P’nyang.

Diego Fettweis, Oil Search’s EVP Commercial, said it ‘signals the strength and support between the PRL3 joint venture and the Government of PNG for a mutually beneficial outcome.’

In December 2019, Santos bought a 14.3 per cent stake in P’nyang, making it the fourth partner in the venture. The others are ExxonMobil, Oil Search and Merlin Petroleum Company (an affiliate of JX Nippon). The PNG State, through state-owned Kumul Petroleum Holdings, has back-in rights to participate in all gas projects.

Santos and Oil Search are currently undergoing in a one-month period of due diligence ahead of a proposed merger.

Now is the time?

Prime Minister Marape, Total SA executives and ministers during the signing of Papua LNG in February. Credit:

P’nyang and the larger Total-led Papua LNG project were once planned by their developers to be carried out simultaneously with significant synergies. However, PNG’s government made it clear in September 2020 that the two projects would need to treated as separate gas projects.

At the time, then-Managing Director of Oil Search, Peter Botten, said ‘we will seek to advance the Papua LNG project in a timely way, recognising that several engineering and commercial modifications will need to be made now that the P’nyang development is delayed.’

While negotiations over P’nyang are just recommencing now, the Total-led project appears to be on track. This month, PNG’s Parliament passed the Oil and Gas (Papua LNG Project) Amendment Bill 2021, which allows Total to go ahead with the pre-FEED and FEED process ahead of its application for a petroleum development license for Papua LNG.

ExxonMobil PNG’s Managing Director Peter Larden and Kumul Petroleum Holding’s Managing Director Wapu Sonk are presenting to the 2021 Business Advantage Papua New Guinea Investment Conference (7-9 Sept). For more information visit: www.pnginvestmentconference.com