ExxonMobil, Santos ink P’nyang gas deal with PNG

ExxonMobil, Santos, and JX Nippon have signed a deal with the Papua New Guinea government on the stalled P’nyang natural gas project which would feed the PNG LNG plant.

Australian LNG player Santos said in a statement on Tuesday that the agreement provides a clear framework for P’nyang’s future development.

The P’nyang gas field is within PRL3, located in the Western Province of Papua New Guinea. Santos has a 38.5 percent interest in the ExxonMobil-operated P’nyang project.

The signing of the gas agreement marks a “major milestone” for the project, setting out the fiscal framework and supporting project scoping and evaluation, the firm said.

“Subject to a final investment decision by the P’nyang participants, the ExxonMobil-operated P’nyang project would deliver LNG through new upstream facilities in Western Province linked to existing infrastructure, including our world-class PNG LNG plant near Port Moresby,” Santos said.

Upon completion, up to five percent of P’nyang gas produced would also be made available to support the government’s electrification efforts in Western Province or another agreed location, it said.

The firm did not provide any additional information.

Santos CEO Kevin Gallagher said he welcomes today’s gas agreement and looks forward to supporting the operator to develop this “valuable resource for the region and as long-term backfill for existing LNG infrastructure.”

“The signing of the P’nyang project gas agreement demonstrates the commitment of all parties to the project and will bring economic benefits for the people of PNG when the project is developed,” Gallagher said.

Additional stake

Santos and PNG-focused Oil Search completed their merger deal in December last year, and the merged company is now the largest shareholder in PNG LNG with a 42.5 percent stake.

ExxonMobil has a 33.2 percent operating interest in the 6.9 mtpa LNG export plant in Caution Bay.

The US giant and partner Oil Search previously planned to develop the P’nyang gas field to feed the third PNG LNG train. However, they have in the meantime decided not to proceed with the additional unit as the partners plan to focus on the TotalEnergies-led two-train Papua LNG project.

Gas from the P’nyang gas field would feed the existing two trains at the PNG LNG plant near Port Moresby.

In September last year, the Papua New Guinea government and ExxonMobil signed two non-binding deals regarding P’nyang.

Previously, they failed to reach an agreement on the development, the PNG government said in a statement in January 2020.

PNG Prime Minister James Marape said in a statement last week that the government has cleared the P’nyang gas deal after almost two years of negotiations.

Under the deal, the state equity in the project would rise to 34.5 percent, the statement said.

ExxonMobil would offload 12 percent of the company’s stake at a “fair market price” to PNG. Marape has committed to offload most of the new stake to Western Province and landowners, the statement said.

“With P’nyang coming on board, it means that PNG will be a gas producing nation up to 2060 and PNG LNG beneficiaries will collect toll revenue from P’nyang LNG in the period they are in production,” the statement said.

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