By David Winning 
 

SYDNEY--Oil Search Ltd. (OSH.AU) and partners in Papua LNG said an agreement has been signed with the Papua New Guinea government that defines the fiscal framework for the gas-export project.

Oil Search, Exxon Mobil Corp. (XOM) and Total SA (TOT) have agreed to fiscal terms that include an obligation to supply some gas to Papua New Guinea to support local industry and power generation.

They also agreed to a deferred payment mechanism for Papua New Guinea's payment of past costs, seeking to ease "the financial burden associated with the state's acquisition of its equity interest in the Papua LNG project," Oil Search said in a regulatory filing.

The gas agreement is a key milestone in developing some of Papua New Guinea's largest untapped natural gas reserves. Oil Search said the Papua LNG venture can advance toward front-end engineering and design work, or FEED, including the selection of a contractor.

Oil Search added that it can now focus more on working with Exxon and the Papua New Guinea government on a separate agreement for the development of the P'nyang gas field in the highlands region of the South Pacific nation. A deal would enable that development also to enter FEED, and support a third gas-processing unit at the active PNG LNG export facility with first gas production from the expanded operation in 2024.

 

- Write to David Winning at david.winning@wsj.com

 

(END) Dow Jones Newswires

April 08, 2019 21:31 ET (01:31 GMT)

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