Last month, Twinza and Mineral Resources Development Corporation signed agreements which will see MRDC acquire a major stake in Pasca A, Papua New Guinea’s first offshore gas project. Twinza Executive Chairman Stephen Quantrill tells Business Advantage PNG the deal also paves the way for further cooperation.

Pasca A project. Credit: Twinza

Twinza Chairman Stephen Quantrill describes the deal to bring the Mineral Resources Development Company (MRDC) into the proposed Pasca A gas project in Papua New Guinea’s Gulf of Papua as a “genuine strategic alliance.”

Last month, Twinza and MRDC announced a series of binding agreements which will see MRDC acquire up to a 50 per cent participating interest in the US$1.5 billion Pasca A project. MRDC will pay US$160 million (K620 million) for a 50% stake.

“Initially, we were wrestling with the idea of giving up as much as 50 per cent,” Quantrill tells Business Advantage PNG.

“MRDC will have a clear seat at the table with us on all major strategic and commercial decisions.”

Twinza’s Stephen Quantrill.

“The more we thought about it, so long as the transaction was on commercial terms, we were comfortable that the culture fit of our organisations, MRDC’s track record as a strategic investor and the strength of the relationships that come with MRDC participation warranted entering into a strategic alliance – alongside the strategic investment. It is also a way of ensuring that a greater proportion of the benefits of the Pasca project flow to the people of Papua New Guinea.”

Charting new waters

Under PNG law, MRDC manages benefits from oil, gas and mining projects on behalf of landowners and provincial governments. This has seen it obtain equity stakes of between two and 12 per cent in various resources projects, including a 2.8 per cent interest in the ExxonMobil-led PNG LNG project. It has reinvested a portion of the royalties from these projects into a range of other assets – including the Star Mountain Plaza real estate development in Port Moresby and domestic airline PNG Air – in an investment portfolio valued at over K7 billion.

The Pasca A deal differs from other PNG resources projects in that when fully invested it gives MRDC an equal equity stake.

“Twinza will be the operator of Pasca A. That’s firmly reflected in all our agreements. But we’ll both treat it in the spirit of a strategic alliance. We’ve put in place joint operating agreements that are balanced. MRDC will have a clear seat at the table with us on all major strategic and commercial decisions,” Quantrill says.

“I think everybody sees this is an opportunity for MRDC. The experience that MRDC have gained from their participation in other petroleum projects, and their commercial success in other projects, has given them an appetite for greater involvement in the petroleum sector, with a view to ensuring that a greater share of project benefits flow to landowners and provincial governments and for the petroleum and energy industry to be a big part of their future portfolio.”

Regulatory approvals

Now that the transaction has been completed, the focus is on securing long-awaited regulatory approvals for the Pasca A project – namely the Gas Agreement (for which negotiations began in 2020) and the Petroleum Development Licence (pending since 2015). Pre-FID activities and MRDC’s initial investment in Pasca A will commence once the Pasca Gas Agreement has been agreed and signed.

The appointment of Jimmy Maladina as Minister for Petroleum as part of the January 2024 cabinet reshuffle has also provided Twinza with cause for optimism.

“We welcome the appointment of Minister Jimmy Maladina as the Minister for Petroleum. He clearly has a strong mandate from the Prime Minister to get the Pasca project moving,” Quantrill says.

If all goes to schedule, he says, development could begin by early 2026 and production by mid-2028.

Twinza has invested more than K400 million in Pasca A since acquiring the project in 2008. It envisages a two-phase development: the first phase (estimated cost US$700 million) will comprise a minimal wellhead platform, a mobile offshore production unit, floating storage and an offloading vessel. It is expected to deliver seven million barrels per year of hydrocarbon liquids. The second phase (estimated cost US$800 million) which would be completed as soon as three years after phase one, will add a floating LNG facility, producing 750,000 tonnes per year of liquefied natural gas (LNG).

Thanks to an updated independent assessment in 2023, Twinza economic modelling reflects that Pasca is now expected to deliver K15 billion in revenues to the state over a 25-year production life. The study also highlighted Pasca’s potential to sequester up to 200 million tonnes of CO2, which would make the project carbon negative.

Window of opportunity

In addition to the Pasca A deal, Twinza and MRDC also signed a binding agreement to cooperate on the acquisition and development of other oil and gas assets in Papua New Guinea.

Quantrill says the natural opportunities are in the Gulf of Papua, with “proximate targets that have some sort of synergy with what we’re already doing at Pasca.”

He says there is a window of opportunity for projects to get financing, especially in light of the benefits they can deliver to the energy transition and net-zero goals.

“It’s critical that the country takes advantage of the opportunities it has and really goes after them,” Quantrill says.

“There are a lot of very competent operators trying to get their projects up and running in PNG. I hope we’re seeing signs of the pendulum swinging to a supportive and excited set of stakeholders in PNG, who are willing to work with companies like ours to make these projects a success and leverage them for the benefit of the country.”

Twinza’s Stephen Quantrill will be a participant in the 2024 Business Advantage Papua New Guinea Investment Conference, taking place in Brisbane on 12 and 13 August. To view the program and register, click here.