Fiscal certainty, negotiations key to LNG expansion

Fiscal certainty and negotiations surrounding gas agreements are key considerations in the lead up to concluding discussions on the PNG LNG expansion project.

ExxonMobil managing director, Andrew Barry, said both these areas were crucial as the joint venture partners head in to Front End Engineering Design (FEED).

Barry said this during the 2nd Petroleum and Energy Summit in Port Moresby.

Also critical are the various commercial and project discussions and agreements that need to be made before a final investment decision is made.

“From our perspective, we’ve made really good progress with respect to the design and the concept of the LNG capacity at the plant, which is one of the big steps that we needed to do and started to get alignment with ourselves with respect to that,” stated Barry.

“There’s quite a bit of engineering work that we obviously go through pre-FEED and up into FEED, but the real big next step, from our perspective, is negotiations around the gas agreements and fiscal certainty as we head into that FEED.

“And then once you get alignment into that FEED, the gas agreement, the fiscal terms, and then between FEED and proper FEED, there’s obviously a lot of work associated with the commercial agreements of integration activities, but then as we go into the market and securing gas agreements or gas sales agreement, project financing.

“And of course prior to FEED, the Production Development License which has all the community engagement and development forums that are required prior to FID.”

Meanwhile, Oil Search managing director, Peter Botten, says the PNG LNG expansion project will be another outstanding project building on the existing one.

Botten said the joint venture partners in the PNG LNG have shown they can operate a project in PNG and they are well prepared to deliver the expansion project.

He added that while it is being predicted that tough market conditions are expected, they have shown that an efficient production can be made.

“This time around were so much better off than the first project. You mentioned that market may be tighter this time around and obviously equity marketing is the key part of the future of the project.

“But in reality we’ve demonstrated you can build an absolute world class project and you can operate it effectively and efficiently here.

“When we did the first project it was all brand new, and it was an act of faith, if you like, for many of the marketers and financiers.

“The joint venture was far weaker than the joint venture going into the second round, and I think were far better off frankly,” said Botten.

Cedric Patjole