The project was completed in 2014 after rapidly completing planning and construction phases:[5] When the proposals for an LNG facility in PNG were raised there were two factions in the cabinet: one headed by Prime Minister Michael Somare who advocated a partnership with InterOil to develop the Elk-Antelope gas field, and the other by his son Arthur Somare, who advocated a partnership with ExxonMobil/Oil Search to develop the Hides gas fields.
The fields are located in a marshy area in the eastern margin of the Papuan Basin to the west of Port Moresby (90 km from the Gulf of Papua coast).
The driving force in Interoil was its founder: Phil E. Mulacek, who announced in 2007 the discovery of a large gas field on the edge of the Gulf of Papua in the south of the country.
"The InterOil Corporation, made the kind of announcement investors crave: explorations near the refinery had uncorked a vast pool of natural gas potentially larger than the United States' total residential consumption of the fossil fuel in 2005.
The size of the discovery was so large, Phil E. Mulacek, chairman and chief executive, informed an analyst, that simply controlling its output 'was sort of like trying to stop the Mississippi.
[68] However, at the end of 2012 Interoil did not manage to find a partner to reach a Final Investment Decision (FID) and were in danger of losing the licence.
The French multinational Total SE is a major company in the oil and gas industry and they filled the void by buying a 60 percent interest in the gasfield.
[84] The Memorandum of Understanding between the PNG government and the companies involved in the Elk-Antelope field was announced at the end of the A Asia-Pacific Economic Cooperation (APEC) conference in 2018.
Its intent was to support PNG's international status,[85] and it was followed by an agreement in April 2019 to start the Front End Engineering Design process.
[87] In 2017 the first LNG exports were expected in either late 2020 or early 2021[88] The new dates are also speculative because the financial underpinning of the announced agreement is virtually absent.
[89] He was under pressure from a comment in the March Monetary Policy Statement from the Bank of Papua New Guinea, which urged the government to be less generous with tax concessions.
Morauta distributed a letter from the Department of Energy to the Secretary of the Government, which demanded that a proper APDL be made with the necessary documentation about the field's size and its economic viability.
[106] His successor, James Marape, announced changes in the management of PNG's natural resources in his maiden speech, though at the same time he was keen to reassure investors: "He did not intend to chase industry away, but asserting that reforms were needed to ensure benefits are spread more evenly.
"[107] Oil Search's Peter Botten proclaimed immediately after Marape's appointment that it was likely that nothing would change and arrangements would remain the same when the third gas field Pn'yang came into production.
[109] Minister for Petroleum and Energy Kerenga Kua announced two months after the change of government that a revision of the "regulatory and commercial terms of the so called LNG agreement was ready for political approval".
Oil Search warned that revisions may push back the FID to 2021 and projects elsewhere in the world may take precedence over Papua-LNG[110] Three government-backed lenders – Japan Bank for International Cooperation (JBIC), the US Overseas Private Investment Corporationt(OPIC) and Export Australia Finance otherwise named Export Finance and Insurance Corporation (EFIC) – announced an initial commitment to lend to Papua-LNG.
Collaboration was resumed after a delay of three years as the result of a meeting in Paris between the CEO of Total and Sam Basil, as deputy prime minister of PNG.
They announced the remobilisation of the project teams and other required resources, At the meeting there was a reconfirmation of the Papua LNG Gas Agreement in 2019 which had been the contentious issue in the fall of the O’Neill/Abel government.
These amendments gave among others greater powers to the minister in determining a PDL (Petroleum Development License) and abolished the option of arbitration in case of a conflict.
This was made evident by Petroleum Minister Kerenge Kua when he stressed that the issues involved remained political at a meeting with a senior visitor from Total in France.
[132] The proposed benefits for the PNG government vary between 50 and 60% and are multifarious including corporation tax, production retained for local consumption, development levy etc.
[138] "The exchangeable bond effectively involved a future swap in shares held in Oil Search for immediate funding for a direct equity stake in the LNG venture.
O’Neill wanted to redress this situation with a new shareholder in Oil Search,[142] who was looking for fresh capital to buy a stake in the next LNG project: the Elk-Antelope gas field.
[148] The decision has probably passed in some form through the Central Bank and the Ministry of Finance, but prominent PNG economists argued from its inception that "the UBS loan was sought outside of sound fiscal management laws and legal governance".
[157][158] Income from natural resources in PNG projects were far below international standards, according to authoritative institutions (OECD, IMF and IETI Extractive Industries Transparency Initiative).
The energy companies wanted to only proceed with preliminary engineering and design for the expansion of its PNG LNG plan with new trains after a Petroleum Development Licence was given for the P’nyang field.
An umbrella organisation of landowners groups covering the area of operation of Papua/LNG went to the courts in order to ask for a temporary injunction against the continuation of developing Papua-LNG.
The court allowed the landowners to delay the issue of a Production Development Licence until a new agreement was negotiated and a new Petroleum and Gas Act was in place.
The government of PNG has not acquired a shareholding in Papua-LNG through Oil Search despite the cost of contracting and servicing a loan plus unknown extra payments.
However despite this mention Abel said: “The objective should be a more heavily weighted royalty system based on export value as it is much easier to monitor and is not subject to net profit as is dividends and tax.