The progress of Twinza Oil’s US$2.4 billion (K8.42 billion) Pasca A offshore gas project in Papua New Guinea has again stalled, following a draft gas agreement from the government which the developer claims ‘bears no resemblance’ to the terms it agreed last month.

Flaring at Twinza’s offshore well. Credit: Twinza Oil

In July, after nine months of negotiations, Petroleum Minister Kerenga Kua announced that the government’s State Negotiating Team (SNT) and Twinza Oil had agreed terms for the Pasca A gas project in the Gulf of Papua, slated to be PNG’s first offshore offshore gas project.

A copy of the signed terms, as agreed between the SNT and Twinza last month, has been released by Twinza

While the agreement still needed to be endorsed by PNG’s National Executive Council, a provisional date of 29 July was set for the signing of a final gas agreement.

That date passed without any agreement being signed, however, and now the developer, Twinza Oil, has issued a statement that it has received a revised agreement from the SNT which ‘bears no resemblance to the agreement of the 6th July 2021’.

It claims that the new draft contains ‘over 2,400 changes in only 76 pages, and is essentially a new agreement.’

‘The agreement would be unacceptable to any investor and introduces new fiscal terms and inexplicable new conditions, several associated with Kumul Petroleum, that would make the Pasca A Project, or indeed any project in PNG, non-commercial and unfinanceable,’ says the statement.

‘This is both disappointing and surprising given that negotiations have concluded, and what should be a routine close-out process is being stewarded by the Minister for Petroleum.’

Clarity

Twinza says it is urgently seeking clarity from the Minister ‘as to whether there is support for foreign direct investment into the country and that the State will honour the deal of the 6th July 2021.’

‘This is the third time since the negotiations commenced over 12 months ago that the SNT has changed agreed terms,’ said Twinza Oil’s Chairman and CEO, Ian Munro. ‘Other operators and investors are closely observing whether the Pasca Project can effectively navigate the State’s bureaucracy and vested interests of some individuals in the SNT, to progress toward FEED entry.’

‘Notwithstanding this setback to investor confidence in PNG, I remain hopeful that the Minister for Petroleum, an experienced lawyer, can ensure the State agencies honour the agreed terms to sign the first Gas Agreement under this Government.’

Pandora

It is not clear how these latest developments affect the nearby Pandora gas field, which Twinza Oil is also seeking to develop. Twinza applied for a Petroleum Retention License covering the ‘stranded’ Pandora A and B Fields in November 2018 and had been seeking to include Pandora in the Pasca A gas agreement, according to a statement it released last week.

‘Pandora and other offshore gas fields will almost certainly need to tie-in to the Pasca A facilities to be economic,’ the statement said.

‘Twinza believes that the ownership of the Pandora Fields should be closely aligned to that of Pasca A ensure an optimum development and to simplify commercial discussions for access to the Pasca infrastructure. The FEED Phase on Pasca A is due to commence after the Gas Agreement is signed and Pandora would need to be included in the engineering design at this stage.’

No statement was available from the Minister for Petroleum at the time of writing.