O'Neil On PNG LNG Costs

[TxPm]

"Source:

The National, Friday 23rd November, 2012

PRIME Minister Peter O’Neill yesterday said the government will raise its share of the cost for the PNG LNG project for which construction cost has been upgraded from K15.7 billion to K19 billion.

Operators Esso Highlands (ExxonMobil) explained last week that the cost overrun had been forced mostly by the appreciation of the kina, delays caused by landowner actions and adverse weather.

O’Neill expressed disappointment at the US$3.3 billion cost overrun but said the additional cost would not impact the 2013 budget.

He said the cost for meeting the state’s share of the massive project was separate from the budget. The state team would have to negotiate with the partners for the additional cost.

The state’s shareholding in the project is more than 19%.

Nonetheless, the company also announced that it had increased the amount of LNG to be exported from 6.6 billion tonnes to 6.9 billion tonnes annually. This would, if realised, more than offset the cost overrun.

PNG government’s share of the cost, at yesterday’s rates, would be nearly K800 million."

[TxPm]

This is the line above I find most interesting/relevant:

"O’Neill expressed disappointment at the US$3.3 billion cost overrun but said the additional cost would not impact the 2013 budget.
He said the cost for meeting the state’s share of the massive project was separate from the budget. The state team would have to negotiate with the partners for the additional cost."

By partners do you think he means XOM & OSH or partners as in China & Shell? Also I find it interesting they don't seem to have a problem coming up with the cash to pay for overages & that it's not in the Budget....maybe coming up with Cash for IOC wot be that hard after all

[Palm]

The State's share is paid on the back end out of production. That's one of the reasons it's set up that way. The project partners other than the State must front the State's share until production.