ExxonMobil wlecomes Somare's announcement on LNG project terms
Updated
ExxonMobil says the Papua New Guinea government's agreement on fiscal terms for its 11 billion US dollar Liquid Natural Gas project is a significant step forward.
Prime Minister, Sir Michael Somare, announced the agreement in parliament, late last week, and said he had directed the whole of his government to focus on finalising the Gas Agreement with the project partners. The project partners include Oil Search, the Australian Gaslight Company, SANTOS, Nippon Oil Exploration and PNG's Mineral Resources Development Company. Independent economic assessments have suggested that, if the LNG project goes ahead, it could double the number of jobs in PNG and create an income stream for government and landowners of 31 billion U-S dollars over its 30 year life. ExxonMobil's Project Executive for the PNG LNG Project, Peter Graham, says the fiscal agreement announced by Mr Somare is fair and balanced.
Presenter: Jemima Garrett
Peter Graham, ExxonMobil's Project Executive for the PNG Liquid Natural Gas Project
GRAHAM: The determination of fiscal terms that will apply for the life of the project is clearly very important basically for the viability of the project. Tax rates and the like play a very important part in determining the economic returns for the project and the project's viability long term.
GARRETT: Prime Minister Somare has set a pretty tight deadline to sign the gas agreement by early May. Is that achievable?
GRAHAM: I think it's achievable, it's certainly a stretch(?) target. I think there's a will on both sides to try and close out the remaining issues and certainly Prime Minister Somare's speech I think has galvanized his ministers and departments to do the best they can collectively to work with us to close those items out.
GARRETT: I know you've been meeting almost weekly with the Papua New Guinea government. What needs to be done before the gas agreement can be signed?
GRAHAM: It's really finalising the other terms of the gas agreement, which essentially dictate the legal framework in which the project operates with life. So there are numerous non-tax related matters that we just need to work through and then memorialise in a gas agreement, and that then sets the basic framework for the operation of the LNG project for its life.
GARRETT: So what happens once the gas agreement is signed?
GRAHAM: It's a key milestone for the project developers. It's the last remaining item that we need to close before we commence the front engineering and design activities, which is a very significant step forward for the project.
GARRETT: So once the agreement is signed what sort of action will Papua New Guineans see there on the ground?
GRAHAM: They'll see significantly more activity in the field. We already have some work underway on a limited basis on environmental and archeological and social mapping type work that will see more in country work, larger numbers of engineers working on the pipeline route. The citing of the LNG plant just outside of Port Moresby, offshore surveying activity, and a lot of engineering work being done both in Brisbane, Houston and some in Port Moresby.
GARRETT: Once the gas agreement is signed can you guarantee that the LNG project will go ahead?
GRAHAM: Guarantee is a very strong word I think. I mean we entered this project feeling pretty positive at this point in time with all the signs that we have. We've completed a very comprehensive pre-feed study over the past 12 months to assess the viability of this development. But ultimately we'll be making a final investment decision towards the end of 2009, and that's when we make a firm commitment to take the project forward.
GARRETT: Not all of the projects on ExxonMobil's drawing board go ahead. Just how high up do you think this LNG project in Papua New Guinea is on your list of priorities?
GRAHAM: We don't really look at things that way. It's not as if there's a stereartum (?) of projects and some make the cut and some don't. They each stand on their own merits. So in this case we'll complete a very, very comprehensive feed work program and based on the estimate of cost and the schedule and the market and the financing, we'll make a decision in the context of the risks that exist for the project.
