In a landmark move to accelerate energy development, the Papua LNG project has secured three key agreements signed on Thursday, August 27th, at the Government House in Port Moresby.

This significant occasion was witnessed by Governor-General Bob Dadae, Prime Minister James Marape, State Ministers, and Heads of government agencies of the Petroleum and Energy sector.

Signed between the PNG Government, its agencies, and the Papua LNG Developers ExxonMobil and Total Energies, these agreements mark a significant step toward triggering the Final Investment Decision (FID) by December 15, 2026.

The renegotiated structure, facilitated by the State Negotiations team led by Executive Chairman Dairi Vele and regulated by the Minister for Energy Jimmy Maladina, aims to unlock billions in foreign direct investment and secure long-term energy security for Papua New Guinea.

The Specific three critical components of the deal include:  

1. The Risk-Sharing Price Stabilization Mechanism - given that the project’s estimated costs had risen to K18 billion due to delays since the original 2019 signing- rendering it initially unprofitable- the government negotiated a “give and take” structure. 

After re-quoting contractors, costs were reduced to K14 billion, but the project remained marginally viable. This new agreement establishes a mechanism where the government provides financial support if oil prices fall below a certain threshold, ensuring the project’s viability. 

Conversely, if oil prices rise significantly, the terms ensure shared benefits or reduced government liability. This de-risk the investment for developers, enabling them to proceed toward the FID.

2. Increase in Government Equity Stake - an agreement was executed for the PNG Government to purchase an additional 2.5% equity stake in the Papua LNG project. This raises the national government’s total ownership from 22.5% to 25%. 

With this increased stake, the PNG Government becomes the second-largest shareholder in the project, granting it greater influence over operations and higher financial returns from the development.

3. Commitment to the Final Investment Decision (FID) Roadmap - while not a single document, the signing formalized the binding conditions set by the developers to trigger the FID. 

The parties agreed on strict milestones to be met by December 15, 2026: Completion of the Development Forum. Securing all necessary gas off-take agreements. Raising the required capital of K14.5 billion from international markets.

This commitment signifies that the developers have secured the necessary political and fiscal framework to begin the final push for these items within the deadline.

Prime Minister Marape emphasized that the renegotiated terms balance investor incentives with national gain. 

He noted that while the construction cost was initially tendered at $18 billion, it came in at K14.5 billion after a second round of tenders. 

To ensure the project remained investable, the government provided an incentive package valued at approximately K1.95 billion.

“This instrument paves the way for us to move closer to FID before the end of this year,” said Prime Minister Marape. “We have introduced an agreement structure that ensures the state does not lose out, maintaining its total gain, while providing necessary incentives for investors.”

“It is a ‘win-win’ follow-around model. In good times, the state recovers funds, and in bad times the incentive protects the investment, including our partners Kumul Petroleum which holds a 22.5% stake.”

The Prime Minister highlighted the competitive global landscape, noting that partners Total Energies and ExxonMobil have larger stakes in projects such as Mozambique, involving K22 billion and K30 billion investments respectively, however, he credited their continued faith in PNG.

“It is not easy in this climate to secure world-class investments. Lucky for us, we have the reference of ExxonMobil and Total Energies who have been with us since 2003.” 

“I want to counsel the people of Papua New Guinea: these are global investors. They could be investing elsewhere, but they see Papua LNG as a priority.”

The signing brings the Papua LNG project, valued at nearly K60 billion in foreign direct investment, closer to its target FID date of December 15, 2026. 

Crucially, the Prime Minister outlined a vision that extends beyond Papua LNG alone.

“What happens in Papua LNG is a life beyond Papua. We do not want to repeat the mistakes of 2008-2014 where First Gas was achieved but construction stalled.”

“With ExxonMobil responding positively, we are now sequencing Papua LNG construction, followed potentially by the Pinyang LNG construction,” Prime Minister Marape declared.

He projected that proper sequencing could lead to over K100 billion worth of construction activity over the next decade, integrating smaller fields in Gulf Province. 

This strategy aims to position PNG as a sustained oil and gas producer well into the 2070s and 2080s.

The Prime Minister concluded by thanking all parties involved, urging national unity as the country prepares for the next phase of development.