'Resourcearb' pid='25268' datel Wrote:

Another important component of the near-term explosiveness of InterOil is the pervasive political and operational turmoil in the LNG industry.  Chaos in Egypt and Syria has resulted in a rapid recent rise in crude oil, bolstering the spot price of crude linked LNG contracts.  Importantly, in 2010, Egypt exported 7.1 MMtpa of LNG, accounting for 3% of gobal exports.  Qatar, the world’s largest LNG exporter, is now undergoing a leadership transition after 18 years and is vulnerable to spreading uprisings in the region.  “Nigeria’s export of gas has suffered a major setback as the Nigeria Liquefied Natural Gas (NLNG) said yesterday it had declared force majeure on its exports of liquefied natural gas as a blockade by the Nigerian Maritime Administration and Safety Agency (NIMASA) over a tax dispute, which entered its second week.” (http://www.thisdaylive.com/articles/nlng-declares-force-majeure-over-nimasa-s-blockade/152152/)  Nigeria accounted for 18% of LNG exports in 2010.

By contrast, PNG has entered a very constructive and well controlled political era under PM Peter O’Neill and the country is far from the Middle East.  The LNG landscape is materially improving, and with continued problems in Australia (including Woodside’s reduced production guidance last night), InterOil is about to have a big thematic tailwind to complement the transformational Exxon deal, which is close to being closed and announced.

A very positive development... "Moves by China and India to raise local gas prices will pave the way for increased imports of liquefied natural gas (LNG), as the two nations try to ensure they can meet rapidly increasing demand for the fuel.

Gas prices in both countries have been kept artificially low at levels well below globally traded LNG costs, meaning either LNG importers suffer a loss or local LNG users have to pay a big premium to domestic prices. India last week nearly doubled the price from around $4.20 per million British thermal units (mmBtu) to a pricing formula that will bring prices to around $8.40 per mmBtu from April 1, 2014...

Within days of the gas price hike, Indian firm H-Energy called for bids from EPC contractors for building an 8 million tonnes-per-year LNG terminal in Maharashtra state.

India has plans for an additional 83 million tonnes of LNG import capacity on the books for 2020, much of which may hinge on whether developers feel they can get market prices for LNG.

Chinese importers may be more willing to sign up short-term supplies with export facilities planned in East Africa, Canada and the United States, as well as the more traditional suppliers such as Australia and Qatar, experts say." (http://www.dailytimes.com.pk/default.asp?page=2013%5C07%5C05%5Cstory_5-7-2013_pg5_24)

The timing of this development could not have been more fortuitous for InterOil, as PNG LNG train 3 and most likely, Gulf train 1 establish offtake agreements in the coming months.  Plans to materially increase regasification capacity in China and India are already underway following the domestic price hikes over the past week.  This development is a very important and positive one for the already tight LNG market.