Duma adds a twist to gas supply talks

Papua New Guinea’s Petroleum & Energy Minister William Duma has added a twist to the negotiations between InterOil and ExxonMobil over gas supplies into the US giant’s PNG liquefied natural gas project.

Duma said the government is respectful of the commercial negotiations that are ongoing between the two energy companies, but emphasised that whatever agreement is reached must be within the parameters and project specifications contained in the 2009 Project Agreement between InterOil and the government.

The focus of the discussions between InterOil and ExxonMobil is the acquisition by ExxonMobil of an equity stake in the permit that contains the Elk-Antelope gas discoveries operated by InterOil.

The proposed deal would see ExxonMobil buy an interest in Block PRL-15 that would give it access to 4.6 trillion cubic feet of gas in order to build an additional train at PNG LNG.

There is no suggestion of a new standalone LNG facility, which was the basis of the 2009 Project Agreement, and of the November 2012 Gulf LNG proposal which evidently was approved by the government. However, highly-placed sources said there is no certainty over the legal status of the 2009 agreement, and questioned Duma’s motives.

Duma reiterated that the government intends to take up its legal entitlement of a 22.5% equity share in Block PRL-15.

“At this stage, we do not know when the current negotiations apparently being conducted between InterOil and Exxon will be concluded. However, any final agreement must meet the project specifications contained in the 2009 Project Agreement,” said Duma.

The 2009 agreement stipulated a two-train LNG facility, with each train capable of producing about 4 million tonnes per annum of LNG, based on feedstock from Elk-Antelope.

Over subsequent years InterOil took the project through various guises without progressing to a final investment decision, and in 2012 the government insisted InterOil return to the original 2009 proposal.

Last November, the government apparently endorsed a revised development model called the Gulf LNG Project and, in a surprise move, decided it wanted half the gas resources from the Elk-Antelope field for its domestic market.

InterOil believes a tie-up with ExxonMobil will benefit PNG “in a number of ways” including the use of PNG LNG infrastructure to create strong synergies and cost savings, and allowing for early development of the Elk-Antelope fields.

“InterOil believes that the economic benefits to the existing project partners and the country of Papua New Guinea are compelling.” Most market watchers are supportive of a tie-up between the two companies.

The Elk-Antelope fields are understood to contain best case contingent resources of 9.45 trillion cubic feet of wet gas.

Assuming the ExxonMobil deal is completed, InterOil will still have the option of either developing its own LNG project using the remaining gas from PRL-15 plus other discoveries including the recent Triceratops find, or it could pursue further co-operation with ExxonMobil.

ExxonMobil is already progressing with plans to develop its own P’nyang gas field as a supply source for a third train at PNG LNG.

It is understood that any agreement for Elk-Antelope gas would be the stimulus for a fourth train.

PNG Cabinet Approves InterOil’s Gulf LNG Project

Duma adds a twist to gas supply talks