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Papua New Guinea to honour gas deal with Total

International news organisation, Reuters, announced that despite a change in government, Papua New Guinea will stick to the gas deal that Total S.A. signed with the previous government for $13 billion to increase gas exports, after securing minor concessions from the oil and gas firm.

The decision eases any uncertainty over the plan to double LNG exports from Papua New Guinea, which came into place after new Prime Minister James Marape took his place at the helm in May 2019, with one of his first policies being to win further benefits for the country.

Reuters have stated that the Papua New Guinea LNG agreement is only one of two agreements needed for Total, and their petroleum associates Oil Search Ltd and Exxon Mobil Corp. will receive the green light for the LNG expansion project.

“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.

According to Reuters, the Papua New Guinea government were suddenly called for discussions on the deal in August 2019, which ramped up the doubts already surrounding the deal. Total had some concessions, agreeing to provide a detailed plan outlining how to utilise local services and equipment within the project, according to Minister Kua, and to also hold talks with any third-party looking to gain access to the project’s petroleum pipelines.

Total stated they would be up for negotiation over the Pacific nations stake in the pipelines after the state had re-paid all its loans and costs on the project and would consider purchasing LNG carriers in a collaboration with the state.

Last month, Oil Search Ltd warned the Papua New Guinea government that the delayed  negotiations could increase further costs on the project, and that the contract signed by should be honoured.

An unnamed analyst from Reuters had this to say on the agreement:

“This is a big win for the industry, but they can’t say that, because they need to let the prime minister and Kua save a little political face.”

The government’s decision was welcomed by the three companies.