The Papua New Guinea Government and Twinza Oil have concluded negotiations on terms for Pasca A, PNG’s first offshore gas project. While the terms are subject to approval by PNG’s National Executive Council, a signed gas agreement is expected as soon as the end of this month.

Pasca A. Credit: Twinza Oil

After nine months of negotiations, the Papua New Guinea government and Twinza Oil have agreed terms for the US$2.4 billion (K8.42 billion) Pasca A offshore gas field in the Gulf of Papua. The conclusion was announced yesterday in Port Moresby by Petroleum Minister, Kerenga Kua, who announced the deal would bring 55% of gross project income to PNG.

The 55 per cent share reportedly includes a five per cent production levy, a two per cent royalty for Gulf Province (in lieu of a landowner royalty), and a two per cent development levy.

While this in an improvement on the income the country was able to negotiate in the 2009 Umbrella Benefits Sharing Agreement for the ExxonMobil-led PNG LNG project, it is less that the 60 per cent the minister demanded back in February.

The improved take is indicative of the government’s ‘take back PNG’ agenda, which aims to improve the benefits derived from the country’s mineral resources, which the government has signalled will be enshrined in new resources laws by 2025.

‘It’s a new precedent,’ said Kua yesterday. ‘That’s not to say it’s the final benchmark – that’s a work-in-progress.’

Signing

Twinza Oil’s PNG Country Manager Roppe Uyassi confirmed to Business Advantage PNG that negotiations had been concluded and that a formal gas agreement was currently being drafted, with a view to signature on 29 July. No further announcements are expected from the company until that agreement is signed.

The Pasca A gas condensate field lies in the Gulf of Papua, about 95 km offshore. Twinza Oil 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. Gas exports are expected to commence in 2025.

Long road

It has been a long road to reach a gas agreement on the project. Twinza Oil first applied for prospecting licence back in 2008, which was received in 2011. It subsequently applied for a Petroleum Development Licence for the project in June 2015.

Negotiations on final terms, which seemed to have been concluded last September, subsequently stalled, with both parties at various times threatening to walk away from negotiations, as the government pressed for an improved share of project income.

Several other parties are also exploring for gas in the Gulf of Papua, including ExxonMobil, Total E&P, Oil Search, and Australia’s Palmer Petroleum.

‘The Pasca A project will mark the commencement of a new development environment in the petroleum sector,’ Twinza Oil Director Erick Kowa predicted yesterday.

Twinza’s shareholders include the Clough family, which owns Clough Engineering, and Kerogen Capital, an oil and gas focused investment fund.