shareholdersunite.com

Opportunities in smallcaps

shareholdersunite.com header image 2

Clouds over InterOil’s project clearning

November 4th, 2011 · No Comments

Dare we say we told you so..

PNG govt makes FLNG splash
Friday, 4 November 2011

THE clouds of mystery over recent Papua New Guinea government criticism of the InterOil-led Gulf LNG project continue to clear as state-owned project partner Petromin teams up with Norwegian floating LNG specialist Hoegh to create the PNG Floating LNG joint venture.

PNG FLNG JV managing director Duncan Clegg.

In late September, Petroleum and Energy Minister William Duma criticised the Gulf LNG project for lacking a suitable “world-class” operator, and for how the proposed development did not match the government’s agreement for the project struck in late 2009.

The Department of Petroleum and Energy has since signalled that oil major Shell is the suitable world class LNG operator, and InterOil reacted by starting a formal process to select its own preferred LNG player.

Over the second matter raised by Duma months ago, there are differences between the Gulf LNG project to tap into InterOil’s Elk-Antelope discoveries in the Foreland Basin and its earlier incarnation, known as the Liquid Niugini Gas project.

While the Liquid Niugini project was aimed at building a 6-9 million tonnes per annum LNG plant adjacent to InterOil’s Napa Napa oil refinery near Port Moresby, the Gulf LNG project is based on an onshore modular LNG plant in Gulf province along with an offshore floating LNG facility, for a total of 5MMtpa in 2014.

Although it is foreseeable that floating LNG could face opposition in PNG by taking landowners out of the equation, it has become clear that Petromin wanted its own piece of the FLNG pie.

In an announcement embargoed until midnight, Petromin said it owned 34% of the new PNG FLNG JV while Hoegh LNG and a Daewoo Shipbuilding & Marine Engineering subsidiary each owned 33%.

“Petromin and its partners are providing a total solution for the early monetisation of small scale gas discoveries in the Papuan Foreland Basin,” Petromin managing director Joshua Kalinoe said.

“The solution includes construction of pipeline infrastructure through a gas aggregation strategy that would supply the facility.”

He said the JV has started discussions with upstream licence owners – presumably InterOil – to use its FLNG facility as an option to a land-based LNG plant.

The PNG FLNG JV’s proposed plant will be based on Hoegh’s design and be built in DSME’s shipyard in South Korea.

Shell and Woodside Petroleum veteran Duncan Clegg has been appointed as the managing director of the new JV – and was part of the original Shell team that developed the initial FLNG concept being used for Shell’s Prelude LNG project in offshore Western Australia.

Kalinoe said a draft project agreement with a related term sheet had been presented to PNG’s cabinet for approval.

Petromin and Shell first struck a strategic alliance agreement in August.

Meanwhile, InterOil has made significant progress this year with Flex LNG for its FLNG plans.

Flex LNG started project-specific FEED in May, with Samsung Heavy Industries undertaking the work for the hull aspects of the FLNG vessel while a WorleyParsons-led JV worked on the topside components of the vessel.

Samsung is responsible for the overall design, engineering, construction and commissioning of the FLNG vessel and assigned more than 150 engineers into the final phases of FEED, with completion expected by early November, according to InterOil chief executive officer Phil Mulacek two months ago.

The Gulf LNG project also targeted a ramp up to 8 mtpa though 2015 and 2016.

The final investment decision for the joint venture project is due by the end of 2011.

While gas will be supplied from InterOil’s Elk-Antelope field in Gulf province, further exploration in its licence areas is underway with the Triceratops-2 well expected to spud this quarter.

Tags: IOC