OSH Oil Search Limited

By Robb M. Stewart

MELBOURNE, Australia--Papua New Guinea has cleared the way for Total SA (TOT) and its partners to push ahead with a proposed multi-billion dollar gas-export project after securing concessions to improve benefits for the country.

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

News that a deal agreed by the previous Papua New Guinea government with Total in April would be honored lifts a cloud over two projects that together promise to roughly double the country's liquefied natural gas exports. Prime Minister James Marape came to power in May vowing to review resource-sector deals.

Mr. Kua said a review of the gas agreement was completed and, despite an initial impasse, the French energy company had made some concessions or at least indicated a willingness to explore ways for the government to meet its expectations. The concessions offer future benefits not previously available under the deal signed by the previous government, paving the way for increased national participation during the construction phase, future pipeline ownership, as well as future shipping ownership, he said.

In mid-August, Mr. Kua announced he would lead a team to Singapore to renegotiate the Papua LNG gas agreement signed with Total. At the time, he warned that to restructure a deal that disadvantaged the state and the people, the nation had to be prepared for talks to fail in order to make the country wealthy.

The Papua LNG gas deal agreed to a new 2% production levy and will hand a 22.5% stake in the project to the government. It is a vital step before engineering and design work can kick off on the development, which also involves Oil Search Ltd. (OSH.AU) and Exxon Mobil Corp. (XOM). Settling the agreement will also mean a restart to talks to finalize a gas deal for the new P'nyang field that is expected to feed an expansion of an existing Exxon-led PNG LNG operation.

The government said that Total has now agreed to prepare a plan to set out local benefits and to negotiate to allow third parties access to the project's petroleum pipelines. The French company also agreed to negotiate for the state to take a stake in the pipelines, after the government has repaid all its loans and costs for the project, and consider offering it part ownership in LNG tankers.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

September 03, 2019 05:08 ET (09:08 GMT)

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