The negotiations on the crucial P’nyang Gas Agreement that will underpin Papua New Guinea’s three train liquefied natural gas expansion are slow and gruelling, writes Russell Searancke.

The agreement is crucial because it will enable front-end engineering and design work to begin on the Papua LNG project and the three 2.7 million tonnes per annum expansion trains.

The talks are between P’nyang operator ExxonMobil and PNG’s state negotiating team (SNT).

The PNG government had hoped to complete the negotiations by late November but well-placed sources said this was always as an unrealistic target, given the stop-start nature of the discussions and the government’s stated desire to get better terms than from all previous gas agreements.

In a surprise move, the SNT issued a press release to say PNG wanted to secure “a good deal, not a fast deal”.

The release reiterated that the state wants benefits “far greater than Papua LNG while delivering an attractive return to the developer”.

However, the chairman of the SNT then questioned ExxonMobil’s commitment to developing P’nyang, saying the US operator had “demanded” a development licence before detailing “a reasonable timeline with clear milestones”.

Well-placed sources said dialogue is ongoing and intense and there is a hope that an agreement can be finalised this month.

“There has been give and take on both sides and there seems to be a commitment to get there but progress is slow,” said one such source.

The joint venture owners of the P’nyang project, following completion of Santos’ farm-in, will be operator ExxonMobil on 36.86%, Oil Search on 36.86%, Santos on 14.32% and JX Nippon on 11.96%. These are the same companies that own the PNG LNG facility.

Santos recently said the P’nyang field contains gross best estimate contingent resources of 4.4 trillion cubic feet of gas.

Production capacity is likely to be in the region of 750 million cubic feet per day of gas, with a large onshore production station to be installed at the field location.

A new 250-kilometre onshore gas pipeline will transport gas to the Kutubu field to join the existing gas export pipeline to the PNG LNG facility.

One of the three new LNG trains at the PNG LNG facility will be dedicated to P’nyang's gas.

LNG

P'nyang Gas Agreement talks 'intense and slow'