Papua New Guinea scraps talks with Exxon on P'nyang gas project

(Reuters) - Papua New Guinea on Friday called off negotiations with Exxon Mobil regarding the P’nyang gas project, casting a shadow on a $13 billion plan to double the country’s gas exports by 2024.

FILE PHOTO: A view of the Exxon Mobil refinery in Baytown, Texas September 15, 2008. A big chunk of U.S. energy production shuttered by Hurricane Ike could recover quickly amid early indications the storm caused only minor to moderate damage to platforms and coastal refineries. REUTERS/Jessica Rinaldi/File Photo

The government said Exxon had refused to budge on the financial terms for developing the gas field and failed to come up with an offer it could accept.

The P’nyang field was key to helping feed the expansion of Exxon’s PNG LNG plant, which it operates with partners Oil Search and Santos, among others.

The P’nyang agreement is one of two agreements needed for Exxon and its partners to go ahead with their $13 billion plan to expand LNG exports. The other agreement, the Papua LNG pact, was sealed with Total in September.

“Exxon Mobil’s offer had barely changed from its opening offer presented last November,” Prime Minister James Marape said in a statement, adding that it was not “substantially different” from a recent LNG agreement with Total.

The country is hoping Total will still go ahead with its Papua LNG project, a person close to the negotiations said.

A spokesman for Exxon Mobil told Reuters the company was disappointed an agreement could not be reached.

“We are hopeful that we can continue to work toward an outcome that benefits all stakeholders,” the spokesman said in an email.

The country’s petroleum minister had said last year that the government would press Exxon for “far better” terms on the P’nyang project than it had with the Total agreement.

The government was seeking terms that would give the state more than the 45-50% take that the country is set to reap on the value of Total’s Papua LNG project, the person said, adding that the share was much less than the 80% take that governments such as Malaysia and Indonesia have on gas projects in their countries.

Reporting by Nikhil Subba in Bengaluru and Sonali Paul in Melbourne; Editing by Jason Neely, Saumyadeb Chakrabarty and Daniel Wallis