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Oil Search chief executive Peter Botten has delivered a blunt message to the new government of Papua New Guinea warning against any move to renegotiate a recently agreed LNG contract.
In his first public comments since James Marape became prime minister a week ago, Botten used a speech in Sydney on Thursday to say Port Moresby's development goals could not be achieved without the help of the private sector.
While Marape has indicated he will honour existing contracts, many of those who supported his bid to topple the former prime minister, Peter O'Neill, are seeking to renegotiate the fiscal terms of the country's recently agreed US$14 billion LNG expansion.
This has led analysts to speculate it could be held up for two years, a prospect Botten indicated would see it leap-frogged by other LNG projects around the world.
“We can't wait too long before our place in the queue slips,” Botten told the Sydney Mining Club. “The government is aware of this, as is the new prime minister.”
Botten has already met with Marape and does not believe he will look to renegotiate the US$14 billion expansion project, known as Papua LNG.
France's Total is the operator on the new project, while Oil Search, Santos and ExxonMobile are all shareholders.
Exxon operates the PNG LNG project which has been in production for five years.
“James is a very nice guy, very down-to-earth and straightforward,” said Botten.
“He wants to make sure the people of PNG get fair value out of their resources and I think that is fair enough.”
One potential area of leverage for the new government is the P’nyang LNG agreement. It will feed gas into the expansion project and an agreement between the government and shareholders, which include Exxon, Santos and Oil Search, is yet to be signed.
Marape came to power on May 30 after leading a six-week-long insurrection against O'Neill, who had been prime minister for nearly eight years.
In his first speech as the country's new leader,Marape put foreign companies on notice, pledging to change laws in the resources sector and “take back the economy”.
“Who says one conglomerate from outside can come and tell me I can’t change the laws for my country,” he told parliament.
“I have every right to tweak and turn resource laws. We are all about maximising resources for our country.”
One of the gripes used to remove O'Neill as prime minister was a perception PNG had not got the best deal possible from the LNG expansion, which was finalised in April.
“Our resource laws are outdated,” Marape told parliament.
“We do not intend to chase our investors [out] ... but we will look into maximising gains from what god has given this great country.”
Botten said rhetoric like this was often used in the heat of a political campaign but he and other foreign investors were relying on Marape's pledge to not break any existing contracts.
The political instability has pushed Oil Search shares down 16 per cent to US$6.84 over the past six weeks, as investors worry about project delays and government interference.
On coming to power, Marape also pledged to table an Ombudsman Commission report into the government's borrowing of US$1.2 billion from investment bank UBS – a complicated deal that cost PNG at least US$400 million.
The investigation into the loan, which financed PNG’s purchase of a 10 per cent stake in Oil Search, was another weapon used by the opposition to bring down O’Neill.
Tabling the report, which found the deal may have resulted in 15 laws being broken, is the first step in bringing disciplinary action against O’Neill.
SOURCE: FINANCIAL REVIEW/PACNEWS
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