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Oil Major Faces Off Against Papua Government

Papua New Guinea’s oil minister has accused Exxon of refusing to negotiate a $13-billion LNG project on the country’s government’s terms, Reuters reports, citing the official as saying the terms the Papuan government had offered the companies behind the project complied with international standards.

“It is disappointing Exxon has refused to even consider these terms and we urge them to reconsider their position,” Kerenga Kua told Reuters in a statement.

The project in question, the Papua LNG, will be essentially an expansion on the already operating PNG LNG project, which is run by Exxon, Total, and Australia’s Oil Search. News of the plan to increase PNG LNG’s capacity by adding more liquefaction trains in a new project first broke last year.

The $13-billion expansion will bring the export capacity of PNG LNG up to 16 million tons of gas per year and will involve the construction of three more trains to source gas from the Total-operated Elk-Antelope field and from the P’nyang field, operated by Exxon. The aim is to have the additional capacity in place by 2023 or 2024, when demand for LNG in Asia is expected to hit new highs amid a slowdown in new production capacity additions.

However, after a change in government in Papua New Guinea, a dispute between the state and the companies operating the project arose and has been dragging for months now. Earlier this year, the Papuan government signalled that the parties were getting closer to a resolution, so this latest update from Kua comes as a none too pleasant surprise.

The disagreement concerns the development of the P’nyang field, whose operator is Exxon. The rest of the deal was sealed with Total—operator of the Papua LNG project—earlier this year. Reuters cited an unnamed source as saying Exxon had refused to share with the Papuan government information regarding the cost of the P’nyang field project and other details.

By Irina Slav for Oilprice.com

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