PNG LNG Project

Prime Minister Peter O’Neill said the National Executive Council (NEC) has approved a discounted Option Exercise Price, which will enable beneficiaries to raise the finance to buy shares. 

Through this they can reap the returns they could expect through dividends from their shareholding in Kroton, the company overseeing the State’s interest in the PNG LNG project.

“The original Option was granted under the terms of an agreement that was reached between landowners, provincial governments and the National Government in 2009,” PM O’Neill stated.

Prime Minister Peter O’Neill revealed this in Parliament today.

“Through the Umbrella Benefit Sharing Agreement which was signed in Kokopo in 2009, the LNG provinces and landowners have the option to acquire 4.27 per cent in Kroton, a direct equity in the PNG LNG project.

“Under the agreement, the landowners and provincial governments will pay the State close to US$1.1 billion for 4.27 per cent equity in Kroton.

The discussion will be on how best the process of accessing their royalties and the 2 per cent free carry equity can be fast tracked.

This is after negotiations yesterday reached a dead end with landowners taking a concrete stand on their demands that their outstanding LBBSA and UBBSA commitments be paid as well.

After a whole day of discussions which turned rowdy at some stage, Minister for Petroleum and Energy Nixon Duban and Finance Minister James Marape put forward the option of meeting again with the landowners after parliament sitting next week.

He said PDL 1 landowners will join as well because he claims the Government has taken six-and-a-half years, since the signing of the final LBBSA agreement (Dec 7, 2009), to kick-start the PNG LNG Project.

Andagali says the Government has turned a “blind eye” on its people through the slow clan vetting and landowner identification process.

He said the provincial government supported an NEC-approved “beneficiary group” to negotiate and manage the 4.27 percent Kroton equity, which does not represent the PDL1 landowners’ interest.

Prime Minister Peter O’Neill made this remarks after the members of parliament vote against the motion of the vote of no confidence against him (O’Neill) last Friday (July 22).  

He said as a trading nation, especially in LNG, as well as minerals and agricultural products, the country need a growing world economy, and stronger trade in commodities, and higher commodity prices, to maximise the recovery in the domestic economy

This follows notification on 18 July from InterOil that it had received a ‘Superior Proposal’ from Exxon Mobil Corporation (ExxonMobil) and that the InterOil Board intended to change its recommendation and enter into an Arrangement Agreement with ExxonMobil.

Oil Search in May announced it was buying rival InterOil Corp for $US2.2 billion ($A3 billion). At the same time, Oil Search took some of the risk out of the deal by signing an exclusive memorandum of understanding with French group Total to take equity positions in the InterOil assets.

However, today Oil Search says it’s been notified by InterOil that it has received a better offer from Exxon Mobil, Oil Search’s co-venturer in the PNG LNG Project.

The company stated in its fourth quarter report that they are still generating positive cash flow even at the current depressed oil price.

Given that PNG LNG Project expansion and the Papua LNG Project are considered to be among the most commercially attractive new LNG projects globally, activities to progress these potential developments will continue to be prioritised.

Guidance on 2016 operating costs and capital expenditure will be provided in the 2015 full year results, scheduled to be announced on Few 23, 2016.