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Papua New Guinea to honour gas deal with Total

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According to Reuters, Papua New Guinea has stated that it will stick to the gas deal that Total SA signed with the previous government for a US$13 billion plan to increase gas exports, after securing minor concessions from the oil and gas major.

Reuters reports that this decision will remove any uncertainty regarding the plan to double LNG exports from Papua New Guinea, which came to the fore after new Prime Minister James Marape rose to power in May this year, promising to win further benefits for the country.

According to Reuters, the Papua LNG agreement is one of two agreements needed for Total and its partners Oil Search Ltd and Exxon Mobil Corp. to proceed with the LNG expansion project.

In a statement, Petroleum Minister Kerenga Kua said: “The government has now cleared Total to proceed full steam ahead with the implementation of the Papua Gas Project.”

Reuters reports that doubts surrounding the agreement ramped up last month, as the government suddenly called for discussions to revise the deal. Kua reportedly said that Total had made some concessions, agreeing to provide a detailed plan outlining how much local services and equipment would be utilised in the project, and to hold talks with any third party looking to gain access to the project’s petroleum pipelines.

In addition to this, Total would also be happy to negotiate for the Pacific nation to take a stake in the pipelines after the state has repaid all its loans and costs on the project, and would consider buying LNG carriers in a joint venture with the state.

Kua added: “Most of these are substantial new concessions on potential future benefits.”

According to Reuters, the companies had insisted that the Papua LNG gas agreement signed by Total signed in April should be honoured. Last month, Oil Search reportedly warned that it was possible that costs on the project could increase if it was delayed by lengthy negotiations.

Reuters quoted one unnamed analyst as saying that the government had capitulated to Total, only winning non-committal offers to consider future steps that could benefit the country.

The analyst said: “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 three companies welcomed the government’s decision.

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