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Total, Exxon May Have To Renegotiate Papua LNG Deal With Government

French Total may need to renegotiate the terms of a deal for the construction and operation of an LNG project in Papua New Guinea if the country’s government finds the current terms of the agreement lacking in any respect, Reuters reports, quoting Petroleum Minister Kerenga Kua.

“Any signatory to a contract can, anytime after an agreement has been signed, go back to the negotiating table if they are, as an afterthought, unsatisfied with certain aspects of the terms and conditions of the contract,” Kua said. “Our approach is purely commercial in nature.”

The government’s stance may dampen further foreign interest.

The Papua LNG project is 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 expansion, estimated to cost some US$13 billion, 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 seen to hit new highs amid a slowdown in new production capacity additions.

The final investment decision was expected this year and indeed in April, Exxon and Total announced the sealing of a preliminary deal with the Papua New Guinea government on Papua LNG.

Now, the government is reviewing the terms of this deal and the minister’s remarks suggest this review may take a while as could any renegotiation of its terms. This would in turn possibly delay plans to turn Papua New Guinea into a contender for the top global spots for LNG exports.

By Irina Slav for Oilprice.com

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