– Prime Minister Hon. James Marape today announced the successful conclusion of negotiations for the Pasca Gas Agreement, marking a significant milestone for Papua New Guinea as the country prepares to develop its first offshore petroleum project. The agreement, concluded in just six months following the resumption of negotiations in June this year, represents a balanced outcome for all stakeholders and sets new benchmarks for future resource development projects in PNG.
The Pasca A Gas Project is Papua New Guinea’s first offshore petroleum project, aiming to deliver significant economic and social benefits through a collaborative partnership between Hevehe Petroleum, Twinza Oil, and the Government of Papua New Guinea.
“This is a historic achievement for Papua New Guinea, and I commend all parties for their dedication and efficiency in bringing this agreement to completion,” Prime Minister Marape said.
“This agreement reflects our government’s commitment to securing better terms for PNG while fostering a stable and supportive environment for our project partners.”
Key Highlights of the Pasca Gas Agreement
1. Efficient Negotiation Process
• Negotiations resumed in June after the Mineral Resources Development Company (MRDC) acquired a direct equity interest in the Pasca project in May.
• The involvement of MRDC and Hevehe Petroleum brought corporate expertise and a joint venture dynamic that expedited the process.
2. Unprecedented Government Take:
• PNG will receive close to 70% of the project’s value through a combination of corporate tax, royalties, development levy, production levy, and newly secured measures such as:
• Domestic Market Obligation (DMO) levy of 1%.
• Fiscal Stability Tax of 2%, raising corporate tax to 32%.
• Expanded DMO Cut, including domestic marketing of LPGs.
3. Landowner and Provincial Equity:
• Hevehe Petroleum, a subsidiary of MRDC, holds a 50% interest in the project, empowering landowner companies and provincial governments.
• The Gulf Provincial Government directly owns 10% of Hevehe and will benefit from 2% development levy, 2% royalty, and 2% free equity, making it the primary beneficiary of the Pasca project.
4. New Safeguards and Accountability Measures:
• The agreement includes a Final Investment Decision (FID) Sunset Date, requiring the project to reach FID and financial close within 30 months, with a 12-month extension for force majeure situations.
• No warehousing or license trading will be allowed under this agreement.
5. Improved Wellhead Value Formula:
• Only operating expenses (opex) will be deducted when calculating royalty and development levy, addressing past concerns and ensuring better returns for PNG.
Prime Minister Marape highlighted the strategic importance of Pasca as PNG’s first offshore petroleum project and the potential for future growth in the oil and gas sector.
“We are excited about the partnership between Hevehe Petroleum and Twinza Oil. Hevehe’s landowner- driven equity sets a precedent for defining our own destiny in resource development. This project positions PNG for further growth, with the potential for landowner companies to assume operatorship roles in the future,” Prime Minister Marape stated.
The Gulf Provincial Government stands to benefit significantly from the Pasca project. With over 50% equity in Hevehe, including a 10% direct stake, Gulf entities will enjoy exclusive advantages, including:
• Development levy, royalties, and free equity allocated solely to Gulf, unlike the
PNG LNG project, where benefits were shared across multiple provinces.
“This agreement not only delivers a high government take but also ensures that landowners and the Gulf
Province have a leading role and stake in the project’s success,” Prime Minister Marape emphasised.
The MRDC, with decades of experience in PNG’s oil and gas sector, played
a pivotal role in ensuring the success of the Pasca Gas Agreement. As a joint venture partner in major projects like Kutubu, Moran, Gobe, and PNG LNG, MRDC’s expertise and relationships with global oil companies were instrumental in securing favorable terms and facilitating a smooth negotiation process.
“This milestone sets a strong foundation for future offshore developments, empowering landowners and provincial governments to take a more active role in shaping PNG’s resource future,” Prime Minister Marape concluded.