ExxonMobil has reportedly signed one or possibly two non-binding agreements with the state of Papua New Guinea with regards to the proposed P'nyang gas project.

PNG Prime Minister James Marape and a delegation of his ministers met ExxonMobil executives in Houston, reported PNG's The National news company.

One or possibly two Heads of Agreement (HoA) were signed regarding the P’nyang Gas Agreement and regarding an additional equity stake in the project for the state of PNG.

The P’nyang Gas Agreement, which will outline the fiscal terms and conditions of the project, has not yet been negotiated.

The news report in The National did not clearly outline what the Heads of Agreement relates to, but sources in PNG told Upstream it is quite simply an understanding to sign the Gas Agreement in due course.

As far as the additional equity is concerned, PNG sources told Upstream the agreement will see the state offered an additional 10% interest by the existing joint venture on top of its 22.5% back-in entitlement.

ExxonMobil confirms

An ExxonMobil spokesperson confirmed that two HoAs had been signed.

The first was a critical step towards alignment on a Gas Agreement that will help define the development and operation of the P’nyang project for the long-term.

The second provided for the PNG government and ExxonMobil to enter into discussions for the state to purchase additional equity from ExxonMobil in the P’nyang project.

"We will continue to work with the government to align on a Gas Agreement that ensures fair benefits for the people of PNG and project stakeholders. The P’nyang joint venture partners thank the government for its support and look forward to progressing discussions further," said the spokesperson.

Setting a framework

A PNG source told Upstream the HoAs are non-binding and set a framework for both sides to progress the upcoming negotiations.

“The project timing is sequenced in a way that P’nyang commences as soon as the Papua LNG construction is completed,” Marape was quoted as saying in The National.

“This provides costs synergies which will (mean) certainty and opportunity to PNG businesses for a period of eight years of construction of the two projects."

The joint venture owners of the P’nyang project are operator ExxonMobil and Oil Search each with 36.86%, Santos with 14.32% and JX Nippon with 11.96%.

The P’nyang field contains gross best estimate contingent resources of 4.4 trillion cubic feet of gas, according to Santos.

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