Papua New Guinea is preparing to negotiate new fiscal terms for a US$10 billion expansion of ExxonMobil’s liquefied natural gas (LNG) project in the Pacific nation in a push to boost revenue, PNG Treasurer Patrick Pruaitch said on Sunday.
The bid comes amid rising concern among rural landowners that they have yet to see the full benefits of the US$19 billion PNG LNG project after more than two years of operation. [restrict]
ExxonMobil now wants to add a third production unit.
PNG has been hit hard by a slump in oil and gas prices and a drought which crippled farming and brought production to a halt at its largest copper mine to a standstill.
“Current metal and oil prices do not support what we are doing,” Pruaitch told Reuters in an interview ahead of a conference in Sydney where the government is looking to drum up investment in the mining and energy sectors.
“Our message is that we have a sufficient pipeline of projects…The time to do the hard yards is now,” he said.
Two multibillion dollar copper and gold projects, Wafi Golpu owned by Newcrest Mining and Harmony Gold, and Frieda River owned by Guangdong Rising Assets Management, are awaiting the government’s green light by mid-2017.
The government has more than halved its forecast for GDP growth this year to 2 percent. For next year it sees growth picking up to 2.8 percent, based on higher copper and oil prices.
To boost revenue, the government wants to raise US$640 million by selling a 4.27 percent stake in the PNG LNG project to landowners, but a deal has been stalled by disputes over landowners’ entitlements.
“I’m desperate to ensure that every available revenue that I can use to fund this year’s budget I will put my hands on, including the proceeds of the sale of 4.27 (percent),” Pruaitch said.
PNG recently lined up a US$500 million loan from Credit Suisse, after putting on hold plans to raise US$1 billion with a sovereign bond issue, due to market volatility. Pruaitch said the government still wants to pursue a bond issue in 2017, but it was more likely to be for US$500 million.
With dwindling revenue from mining, the government was counting on LNG — with contract prices tied to oil — to return the budget to surplus by 2020. Yet with a slump in oil prices, it now expects deficits to persist for at least another five years.
Pruaitch said the government aims to reach a deal with ExxonMobil over new tax terms for expansion of the PNG LNG project in 2017, to ensure it goes ahead in time for an expected upturn in the LNG market early in the next decade.
It is important to negotiate better terms for the country on what is expected to be a $10 billion project, he said…REUTERS/PACNEWS [/restrict]