OPINION: Uncertainty shrouds Papua New Guinea’s upstream oil and gas sector, which suffered a punishing 2020 due to the effects of Covid-19 and policy interventions by the government.
Apart from the PNG LNG project, which actually produced at record levels of 8.8 million tonnes per annum of liquefied natural gas, upstream activity essentially ground to a halt in the country last year.
There was no exploration drilling and no progress on the three-train LNG expansion, although there was an acceptance by the end of the year that the Total-led Papua LNG project should proceed as a standalone two-train scheme.
A smaller offshore gas and condensate development — Pasca A — is likely to progress this year, and new player Arran Energy is trying to build momentum with the Stanley and Elevala-Ketu gas and condensate discoveries.
But it is difficult to predict what will happen with Papua LNG and ExxonMobil’s P’nyang and Muruk projects.
The PNG government is desperate to see more investment in oil, LNG and other natural resources but it also made clear that it wants a much larger slice of the benefits, which are central to Prime Minister James Marape’s “Take Back PNG” philosophy.
Marape — who barely survived a leadership challenge at the end of the year — seems invigorated about implementing his new petroleum fiscal reforms as soon as parliament resumes in April.
It would be no surprise if the opposition tried again to unseat Marape but, with national elections due in mid-2022, votes of no confidence are not permitted in the last 12 months of a government’s term, meaning the opposition would have to move smartly once parliament restarts.
If Marape passes his reforms, Total and ExxonMobil may take their investment dollars elsewhere, while Oil Search has already said it is focusing on Alaska this year rather than PNG.
Marape needs to be careful that his new reforms do not result in a future PNG without foreign investment.
All indicators are that 2021 will be a decisive — and bumpy — year for PNG.
(This is an Upstream opinion article.)