PNG government changes terms for proposed Pasca A development
The government of Papua New Guinea has increased demands on the gas agreement for Twinza Oil Ltd.’s proposed Pasca A development in permit PPL 328 in the Gulf of Papua.
The government informed Twinza Apr. 16 that it now requires a 6% production levy on the project to sign the agreement—an increase of 4% from the production levy agreed to as part of the terms negotiated by PNG’s state negotiating team and announced by Prime Minister James Marape on Sept. 24, 2020, Twinza said.
As a result, the gas agreement, which was to have been signed this week, has been put on hold with Twinza standing down its Pasca project team until there is clarity on terms and execution of the agreement.
Twinza said the government first demanded in February to raise fiscal take to 55-60% nominal share, which is 75-85% of the actual project value, making the project unviable for investors and financiers.
The earlier agreed terms would have delivered the highest State take from any resource development in PNG, Twinza said. The terms were widely regarded as meeting the demands of the State, including early revenues, full royalty and development levy entitlement and a domestic market obligation of 5-10%, while satisfying requirements of project financiers.
Twinza has offered an additional concession to the earlier agreed terms—a production levy increase to 4% and an increase to 6% when oil prices are higher. It is awaiting a response.
The signing of the agreement this week would have allowed the project to proceed immediately to a front-end engineering and design stage with the aim of a final investment decision in 2022 and an on-stream date of 2025.
Pasca is a carbonate pinnacle reef reservoir in a water depth of 93 m about 90 km from the PNG coast. Recoverable reserves are estimated at 70 million bbl of condensate and LPG and 327 bcf of gas. The field was discovered in 1968.
Twinza was awarded the Pasca license 10 years ago and has since spent over 350 million PNG kina in appraisal and pre-development work. The agreement process has already taken 10 months.
Twinza planned to develop Pasca in two phases. The first involves two production wells and one gas re-injection well at the field connected to a small wellhead platform adjoining a self-installing platform for the processing facilities. Phase 1 will see production of condensate and LPG to be stored in a floating storage and offtake vessel moored alongside. Dry gas will be re-injected into the reservoir.
Phase 2 will involve a floating liquefaction storage and offtake vessel based on continuing residual gas production plus gas from the re-injection well converted into a producer by reversing the flow.
If it goes ahead, Pasca A will be PNG’s first offshore petroleum development.
Twinza has 77.5% interest and the PNG Government will take the remaining 22.5% interest.