OPINION: The latest agreement in Papua New Guinea between the government and Total is good news for the proposed Papua LNG project but there is still a long way to go to make the project a reality.
The fiscal stability agreement signed on 9 February is the final step to guarantee the Papua LNG Gas Agreement from 2019, which sets the fiscal terms and conditions of the project.
It effectively gives the project co-owners — Total, ExxonMobil and Oil Search — the confidence that the Gas Agreement is sacrosanct, so they can press on with the development.
However, the project has not yet been through the front-end engineering and design phase, which needs to be done before petroleum development and pipeline licences can be applied for.
Then there is the tricky task of a development forum with local landowners in the areas affected by the project.
The landowners and their elected representatives will not tolerate a repeat of the problems that affected ExxonMobil’s PNG LNG project where it took years for landowners to receive their royalties.
It is no wonder that Oil Search’s timeline for the project has first production in 2027, which would imply a final investment decision in about 2023.
Still, there are reasons for optimism, not least that the government is highly motivated to get Papua LNG moving forward, and the project has cost advantages over other proposed developments.
As always with PNG, however, it is the politics and the domestic drivers that create the uncertainty.
(This is an Upstream opinion article.)