The anticipated signing of a gas agreement for Pasca A, Papua New Guinea’s first undersea gas project, has stalled at the eleventh hour. Developer Twinza Oil says it will stand down its project team due to a last-minute State request it claims would render the project ‘unfinanceable’.
Pasca A. Credit: Twinza Oil
The signing of a gas agreement for the Pasca A project appears to have been called off at the last minute.
‘Ahead of a targeted signing date on the 20th April 2021, the PNG Government has again increased its demands from the Pasca A Gas Agreement,’ said a statement issued by Twinza Oil late Monday.
‘The Government informed Twinza on 16th April 2021 that it now requires a 6% Production Levy in order to sign the agreement. This is four per cent higher than the Production Levy that was agreed as part of the comprehensive terms … for Pasca A, negotiated by the State Negotiating Team.
‘The additional levy which has been requested would make the Pasca A Project unfinanceable for any investor.’
‘The signing of the Pasca A Gas Agreement this month would have allowed the Project to immediately move into the Front-End Engineering and Design phase, with a final investment decision in 2022 and first production in 2025’
In an effort to finalise the agreement, Twinza says it offered to increase the Production Levy to 4%, ‘with a further increase to six per cent at higher oil prices’.
Twinza’s announcement suggests the government has not entertained this revised offer.
‘The signing of the Pasca A Gas Agreement this month would have allowed the Project to immediately move into the Front-End Engineering and Design phase, with a final investment decision in 2022 and first production in 2025,’ said Twinza’s statement.
‘Given the continued delays, Twinza will now stand-down the Pasca Project team until there is clarity on terms and execution of the Gas Agreement.’
First undersea project
Pasca A, based on petroleum prospecting licence (PPL) 328 in the Gulf of Papua, is set to become PNG’s first undersea gas project.
Twinza is aiming to produce 220,000 tonnes of liquefied petroleum gas annually from the gas field – 20,000 barrels of liquid per day – roughly 55 per cent condensate and 45 per cent LPG.
Last November, Prime Minister James Marape described the project as ‘a benchmark pacesetter in so far as how we want to secure deals for the country, going into the future.’
While a much small project than the ExxonMobil-led PNG LNG project, Pasca A has been looked to as the harbinger of further projects in the gulf, where ExxonMobil, Total E&P, Oil Search, Australia’s Palmer Petroleum and several others also have petroleum prospecting licences.
Streamline costs
‘Twinza was awarded the Pasca license nearly 10 years ago as a foreign direct investor and since this time the Company has spent more than K350 million in developing a field that was discovered over 50 years ago and passed over by other industry players,’ said Twinza’s Chairman and CEO, Ian Munro.
‘It is disappointing that at the closing stages of a drawnout 10-month Gas Agreement process, the State is now seeking to again revise terms to ones that are demonstrably unacceptable to any investor.
‘Consequently, whilst Twinza remains committed to progressing the Pasca A Project on a fair and equitable basis, the Company will streamline its costs whilst awaiting a Gas Agreement signing on acceptable terms.’
Twinza’s announcement is the latest in a series of attempts by the Marape government to obtain additional benefits from the country’s resources projects. Earlier this month, it announced a ‘binding framework agreement‘ with Barrick Niugini to obtain a bigger share of the proceeds of Porgera gold mine and last month signalled it was ready to restart negotiations with ExxonMobil over its stalled P’nyang gas project.
Who is Twinza Oil?
Twinza Oil Ltd is an unlisted oil and gas company operating within the Asia-Pacific region. Its head office is in Perth, Australia, and its assets are managed out of Singapore.
It has two majority shareholders: Clough Engineering (which has been involved in PNG oil and gas infrastructure projects, including the Kutubu and Hides field development, the Kumul Marine terminal and the construction of the Napa Napa refinery) and Kerogen Capital, a private equity fund manager specialising in the oil and gas sector.
In addition to Pasca A, Twinza holds a second prospecting licence in the Gulf of Papua, PPL 584.
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We don’t need Twinza Oil … period!