The Papua New Guinea government hopes that its ‘in-principle’ agreement with Twinza Oil over the Pasca A offshore gas field in the Gulf of Papua will be a template for new oil and gas projects. But the project isn’t across the line just yet.
The Prime Minister, James Marape, released a statement on 24 September saying that an in-principle agreement had been reached ‘to move forward’ on Twinza’s Pasca A offshore gas condensate field – PNG;s first such project. It noted the agreed terms are ‘consistent with the Government’s negotiation parameters’.
Under the terms agreed, according to the Prime Minister’s office:
- The State will achieve between 61 per cent and 65 per cent of economic benefits
- There will be early revenue to the State
- There will be provincial and direct economic benefits through a two per cent development levy and royalties of two per cent of gross revenue
- There will be access to LPG discounted by 30 per cent for national consumption at five per cent
- There will be a commitment to develop a detailed National Content Plan within six-to-12 months of the signing of the gas agreement
The statement said the project will also deliver immediate economic benefits from ‘downstream processing capability’. It also pointed to ‘back-in-rights at 25 per cent’ for state-owned Kumul Petroleum when a final investment decision (FID) is made, ‘or earlier if agreed’.
‘Twinza is not in a position to confirm with any degree of certainty that the drafting process will deliver a satisfactory agreement.’
Also part of the agreement, according to PM’s statement, is third party access to facilitate future discoveries, aggregation (development of adjacent operations) by the operator if new fields are discovered, and incentives for the operator to conduct more drilling within the licensed Pasca A area.
The site is projected to produce 220,000 tonnes of LPG (liquefied petroleum gas) annually, made up of 55 per cent condensate and 45 per cent LPG. Last year, Twinza Oil’s then-Chief Executive Huw Evans (since replaced by Ian Munro) noted the Pasca A site was ‘surrounded by two trillion cubic feet of discoveries.’
In a sign that this negotiation is intended to become a template for future oil and gas agreements, the statement added that ‘the basis of this negotiation will inform our other on-hand and upcoming negotiations’.
Twinza is an unlisted oil and gas company operating within the Asia-Pacific region. Its head office is in Perth, Australia, and its assets are managed out of Singapore. There are two majority shareholders: Clough Engineering, which has been involved in PNG oil and gas infrastructure projects including the Kutubu and Hides field development, the Kumul Marine terminal and the construction of the Napa Napa refinery; and Kerogen Capital, a private equity fund manager specialising in the oil and gas sector.
The response from Twinza Oil to the PM’s statement suggests that there is still some way to go before agreement is reached, however.
The company issued a statement saying it ‘notes’ the position of the Prime Minister’s office, and confirming that non-binding terms had been agreed on September 13 ‘which met the State’s objectives’.
But the negotiations are yet to be resolved, especially in relation to splits.
‘Twinza is not in a position to confirm with any degree of certainty that the drafting process will deliver a satisfactory agreement. The proposed draft is not yet in a form that would allow the project to progress for several reasons, including providing a State-take substantially higher than the agreed 61-65 per cent quoted in the State’s media release.’
It seems PNG must wait a little longer for its first offshore gas project.
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