- ExxonMobil sees PNG LNG producing at 16 pct above nameplate
- Total says PNG much more complex than expected
- Prime Minister says new terms will be "fair"
(Recasts with Total executive comments)
ExxonMobil
and Total SA , vying to develop new gas fields in Papua New Guinea to tap into an expected market recovery in the next decade, will face tougher terms than the landmark $19 billion PNG LNG project. Prime Minister O'Neill said on Monday the government had been generous when negotiating ExxonMobil's PNG LNG project in 2009, as it was looking to secure the country's biggest foreign investment despite the global financial crisis.
He now wants to strike a better deal on any new projects, at least ensuring more gas for domestic consumption and greater use of local equipment and materials on gas developments, although not at the cost of losing projects.
"We are going to be fair. It is not something where we unnecessarily increase the cost of developing that project. Under current global commmodity prices we need to ensure that it is competitive," he told Reuters at a conference in Sydney aimed at attracting new mining and petroleum investments.
Both ExxonMobil and French rival Total, which is mulling the proposed $10 billion Papua LNG project, cautioned that PNG needs to retain competitive tax terms, although analysts believe it is in a strong position to extract better terms.
The Pacific nation is considered the best location to develop LNG projects in a world of weak prices, despite its complex terrain and community issues, thanks to its proximity to Asia's big LNG buyers, the quality of its gas and lower costs
Amid a slump in oil and gas prices, the PNG LNG project remains profitable and has been so successful that it expects to be able to produce more than 8 million tonnes a year of LNG, 16 percent above its nameplate capacity.
TOUGH TIMES STILL ExxonMobil's PNG Managing Director Andrew Barry agreed the PNG government had been generous in 2009, and urged the government to bear in mind that times are tough now as they were during the global financial crisis.
"It was a time not unlike today with bold decisions to be made to ensure that investment dollars were spent in Papua New Guinea versus other areas of the world."
Total's PNG head said the company had been surprised by the complexity of working in PNG, pointing to the effort the company is putting into building ties with landowners and protecting the environment.
"At this stage, it's fair to say for Total, Papua New Guinea has been a place of big challenges," PNG managing director Philippe Blanchard told the conference.
Total aims to reach a final investment decision on whether to develop the Elk-Antelope gas fields in 2018.
"For everything that we need to do in Papua New Guinea, driving down the costs will be important," Blanchard said.
This meant remaining fiscally competitive to attract responsible operators like Total, said its exploration head in PNG, William Gordon-Canning.
"We're going to need a robust and stable fiscal regime to continuing driving forward exploration in the current economic climate," he told Reuters on the sidelines of the conference.
