Papua New Guinea Approves LNG project

Total Get Go Ahead for US$10 Billion Investment

The government of Papua New Guinea said it will move ahead with plans to develop a major liquefied natural gas project in partnership with French energy firm Total.

The US$10 billion Papua LNG project is set to be the largest single foreign investment in the Pacific country since the US$19 billion PNG LNG project 10 years ago, and is forecast to drive significant break bulk activity across sectors.

"The government has now cleared Total to proceed full steam ahead with the implementation of the Papua Gas Project," said Petroleum Minister Kerenga Kua, in a statement.

Largest Investment in a Decade

The momentous deal had been delayed due to concerns over Total’s commitments and resulted in the firm making a number of concessions for worst case scenario planning, indicating “a willingness to explore with the government avenues for meeting the State’s expectations.”

“Total is ready to progress immediately in preparing a detailed National Content Plan with the Department of Petroleum and Energy, a requested by the Hon. Minister for Petroleum. We are convinced that the development of this National Content Plan will provide many positive opportunities for the State and the people of PNG,” Kua said.

The announcement follows approval by the PNG Cabinet on Monday and extensive negotiations between the government and the developer over the last fortnight.

Third Party Access

Under the terms of the deal Total had agreed to build third party access points to its gas pipeline out of Gulf Province and "if requested by a third party, the Participants have agreed to engage in negotiations to enable access by such third party to the pipelines on mutually acceptable terms."

"It's good news for the Papua LNG JV that the PNG government has validated the original Papua LNG gas agreement terms [however] the newly proposed production sharing agreement (PSA) regime, which was an unexpected step from the PNG government, increases the timing uncertainty around the completion of this agreement as new fiscal terms have to be negotiated for future upstream developments,” said David Low, senior analyst at Wood Mackenzie.

The delay to FEED entry timeline is expected to be up to one year  dependant on how the government progresses with plans to develop its new fiscal framework.