American oil giant Exxon Mobil along with Australian company Oil Search last week announced coinciding purchases of 40 per cent shares in two offshore exploration permits in the Gulf of Papua.
In a statement Oil Search managing director Peter Botten said the deepwater area roughly 150 kilometres south of Port Moresby had been identified for “significant gas potential”.
The move comes after Exxon Mobil successfully won a bidding war for Papua New Guinea-based Interoil, which owns stakes in significant gas fields in the Pacific Island nation.
The $2.5-billion offer topped previous bids from Oil Search and French company Total SA.
“PNG is one of the few bright spots in the world oil and gas industry,” said Erik Anderson, a senior partner at Garden Lawyers who works with the industry.
“Since the 1990s they were drilling for oil but only finding gas, which was frustrating then, but it’s a lot more desirable now,” Mr Anderson said.
“It’s well located geographically, it’s reasonably close to the Asian markets and it has got a lot of potential”.
Investor confidence for major projects
Exxon Mobil’s successful $19-billion Southern Highlands LNG project, which began exporting to Asian markets in 2014, had boosted international investor confidence in the country’s potential for major projects, Mr Anderson said.
In 2013 the Papua New Guinea Government moved to establish the PNG Extractive Industries Transparency Initiative to increase scantly available public information on the industry.
Martyn Namorong, is part of the initiative and works as national coordinator for the Papua New Guinea Resource Governance Coalition, said while there was now greater scrutiny than before, more progress needed to be made.
“There needs to be a lot more openness from state-owned entities who are involved in the oil and gas and mining sector, we need audited reports on their financials,” Mr Namorong said.
“From the private companies we need timely reporting of their assessable income, so that people are able to calculate what benefits that should be expected [by the Government] in the fiscal year.”
Mr Namorong said there was lingering uncertainty over whether a sovereign wealth fund established by the Government to manage LNG income would go ahead because of the country’s skyrocketing debt, caused in part by rock-bottom commodity prices.
He added the flow-on jobs and economic benefits for Papua New Guineans was significantly lower in offshore rather than onshore projects.
Papua New Guinea ranked 158 in the 2015 Human Development Index, the lowest in the Asia Pacific region.