The signing of the Fiscal Stability Agreement between the Papua New Guinea government and Total SA has been announced. It opens to the way for Papua LNG project to go forward.

Prime Minister Marape, Total SA executives and ministers during the signing of Papua LNG. Credit: NBC via Facebook

As predicted last week, the Papua New Guinea government and French oil major Total signed a Fiscal Stability Agreement (FSA) last Tuesday for the Papua LNG (Elk-Antelope) project. This will pave the way for engineering design work to begin on the long-stalled project.

The signing ends a period of uncertainty about if or when the project, which is expected to produce 5.4 million tonnes a year of liquefied natural gas (LNG), would progress to the FEED (Front End Engineering) phase, which is the last major step before a final investment decision.

‘The Papua LNG project will build its two train LNG facility within PNG LNG’s existing facilities at Caution Bay in Central Province and will still be able to leverage multiple technical synergies.’

Prime Minister Marape said the agreement would stick to the terms previously agreed.

‘The signing of the FSA gives full effect to the Papua LNG Gas Agreement signed in April 2019. It demonstrates that, by and large, the government can still honour legally signed agreements, which in the long run provides comfort to long term investors.’

The Prime Minister confirmed that the Papua LNG’s project will proceed as a two train project, with the proposed ExxonMobil-led P’nyang gas project to be considered separately. ‘This allows focused development of the Elk-Antelope field in the Gulf Province.’

📝📝📝 #PNG PM and French Ambassador watching on as the fiscal agreement for the multi-billion dollar Papua LNG is signed by Total and PNG Government. pic.twitter.com/wLRIANWjKR

— Natalie Whiting (@Nat_Whiting) February 9, 2021

OSH_PapuaLNG_Fiscal-Stability-Agreement_20210210

Total and ExxonMobil, operators of the P’nyang field, had previously pushed for a three-train integrated LNG development. Oil Search also expressed support for three trains as an optimal way of developing both P’nyang and Papua LNG. The government, however, has made it clear that P’nyang is to be considered separately, as reported previously by Business Advantage PNG.

‘The Papua LNG project will build its two train LNG facility within PNG LNG’s existing facilities at Caution Bay in Central Province and will still be able to leverage multiple technical synergies,’ Marape said.

‘From an environment perspective, Papua LNG’s environmental footprint will be minimised by this integration.’ He added that the signing is an ‘important statement’ about the country’s national investment program.

De-risking

Dr Kierran Wulff, CEO and Managing Director of Oil Search, believes the signing is a positive step.

‘We are pleased to see further progress achieved on Papua LNG. This milestone highlights the commitment from the PNG government towards Papua LNG and is a significant step in derisking the project.

‘It also demonstrates increasing alignment between the PNG Government and the joint venture partners. We look forward to progressing Papua LNG and announcing further milestones consistent with our Strategic Review announced in November 2020.’

Total said in its 2020 Results and Outlook that LNG would play a more important part in the company’s ambition to move to net zero emissions and turn itself into a ‘broad energy’ company.

‘The Group’s profile will be transformed over the 2020–2030 decade: the growth of energy production will be based on two pillars: LNG and Renewables & Electricity, while oil products are expected to fall from 55 per cent to 30 per cent of sales.’ The company is proposing to change its name to Total Energies.

Yesterday, we announced our intention to propose to shareholders changing the Group's name to #TotalEnergies.

🎥Watch @PPouyanne's address to Total employees. ⬇ https://t.co/ydayHbPW84

— TotalEnergies (@TotalEnergies) February 10, 2021