Prime Minister Peter O’Neill said in a statement that Papua New Guinea’s National Executive Council had approved the 50-50 project in which the government would acquire an additional 27.5% stake over and above its legal 22.5% entitlement, which is managed by state nominee Petromin.
The acquisition would give the government a combined half interest in the Elk-Antelope assets. It is probable that some of this equity would be managed for the benefit of capital-lacking landowners.
Elk and Antelope are carbonate reservoirs, technically part of the same field, but separated by a major fault.
O’Neill alluded to the fact that the terms in which the State will acquire the additional equity still need to be agreed.
O’Neill added that the cabinet had also flagged the possibility of two separate development paths. “Cabinet approved that the project may be commercialised equally and simultaneously on a 50-50 basis between the state and InterOil based on the available saleable gas, using two separate processing facilities,” he said.
He said an internationally recognised LNG operator should operate the upstream facilities, meaning that the government still wants a major player to buy an operating stake in Gulf LNG.
The announcement also alluded to the fact that Petroleum and Energy Minister William Duma last year criticized the development for straying from the original project agreement struck in 2009. Cabinet has now approved the “conditional withdrawal” of its notice to terminate the 2009 project agreement. This is subject to the parties agreeing to certain conditions, including “developing saleable gas on a 50-50 basis.”
A Ministerial Gas Committee headed by Minister Duma has been formed, while a separate bureaucratic negotiation team has also been established with representation from the petroleum department, treasury, the justice department and Petromin.
These teams have been charged with fast-tracking the negotiations leading to commercialisation of the country’s second LNG project (after the ExxonMobil-operated PNG-LNG scheme).
A number of questions still remain.
The original 2009 agreement was based on a one-plant project of 7.6 million tonnes/year of LNG. The exact capacities of two LNG plants mooted in the new agreement have not been specified publicly, but it is likely that they would have a capacity of about 4 million tpy each.
Ongoing negotiations will also decide what form the plants will take—conventional, modular, or floating LNG. There also will have to be input from the company or group of companies acquiring an operating stake in Gulf LNG.
Another question is how the government will finance the acquisition of an additional 27.5% stake.