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UPDATE 2-Papua New Guinea, France's Total sign key agreement for delayed Papua LNG project

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Sonali Paul and Tom Westbrook
·2 min read
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* Papua LNG to be developed as 2-train project

* Total CEO aims to make final development decision in 2022

* Long way to go for Papua LNG - analyst(Adds Total CEO, analyst comments)

By Sonali Paul and Tom Westbrook

MELBOURNE, Feb 9 (Reuters) - Papua New Guinea and France'sTotal SA on Tuesday signed a fiscal stabilityagreement for the Papua LNG project, which PNG Prime MinisterJames Marape and Total hoped would pave the way for work tobegin on the long-stalled project.

After nearly two years of uncertainty over the fate of the5.4 million tonnes a year liquefied natural gas (LNG) project,while the government wrangled over a twinned project, Marapesaid the agreement would stick to terms agreed in April 2019.

"It demonstrates Papua New Guinea's commitment to the PapuaLNG Project and gives comfort and encouragement to thedevelopers to progress the project," Marape said in a statement.

Total and its partners ExxonMobil Corp and OilSearch Ltd had planned to develop Papua LNG in tandemwith an expansion of Exxon's PNG LNG in a $13 billion projectadding three new production units at the PNG LNG plant, to helpsave billions of dollars.

The plan was to double the country's LNG exports to 16million tonnes a year.

However, Exxon has not agreed to terms sought by thegovernment for the P'nyang gas development that was going tohelp feed the expansion, as Marape pushed for bigger benefitsfor PNG than the U.S. major had agreed to in 2008 for PNG LNG.

Instead, Total's Papua LNG project will go ahead with twonew production units to be built at the PNG LNG site, fed by theElk Antelope gas fields, Marape said.

"For me, this is a project that is a priority for thegroup," Total Chief Executive Patrick Pouyanne told reporters inParis after releasing the company's quarterly results.

The project partners will need to redo designs beforestarting preliminary engineering work, but the agreement shouldlower the risk of tenure over the gas fields license, which hadbeen due to expire this year, Credit Suisse analyst Saul Kavonicsaid.

"There is still a long way to go, with tough commercialnegotiations to align upstream and downstream joint ventures,"Kavonic said.

Pouyanne said the company hoped to reach a developmentdecision in 2022, a timeframe which Kavonic said was "veryoptimistic" as the company would first need to negotiate termswith Exxon.

(Reporting by Sonali Paul in Melbourne and Tom Westbrook inSingapore; Additional reporting by Benjamin Mallet in Paris;Editing by Jacqueline Wong, Ed Osmond & Simon Cameron-Moore)