http://www.upstreamonline.com/hardcopy/news/article1331909.ece

The following article was published at the end of last week by Russell Searancke, the plugged in energy reporter for Upstreamonline.  I’ve underlined the important new insights, which make it clear that Exxon is working diligently to close the deal with InterOil, that the PNG government has been kept informed of the deal structure, that PM O’Neill is supportive of the deal, that there are no reasonable grounds for opposition by Duma given the economic advantages of this deal to PNG, that the valuable optionality of additional LNG capacity will be held by InterOil rather than Exxon, and that the deal seeks to facilitate early development of Elk/Antelope.

ExxonMobil and Interoil seeking agreement for PNG LNG expansion

By Russell Searancke Wellington

 12 July 2013 00:00 GMT

ExxonMobil is working hard to finalise an agreement with Canadian explorer InterOil over a gas supply arrangement for an expansion of the US supermajor’s Papua New Guinea liquefied natural gas project.

The Canadian company revealed in late May that it was in exclusive talks with the US supermajor over an equity stake in Inter­Oil’s Elk-Antelope gas discoveries in Block PRL-15.

InterOil subsequently indicated that major commercial and technical terms have been agreed, and the focus is on “finalising a binding agreement”.

Its most recent guidance was that the proposed deal will see ExxonMobil buy an interest in PRL-15 that gives it access to 4.6 trillion cubic feet of gas in order to build an additional LNG train.

An ExxonMobil spokeswoman confirmed that discussions are ongoing, but would not put a timeline on talks.

If a deal is agreed, it will need to be sanctioned by the Papua New Guinea government, which, according to InterOil has been kept well informed about the Exxon­Mobil tie-up.

Prime Minister Peter O’Neill reportedly told local media that he welcomed the potential deal between ExxonMobil and InterOil.

However, Petroleum & Energy Minister William Duma reportedly voiced concern about one major energy company — Exxon­Mobil — dominating the country’s petroleum industry.

Duma had lobbied for the involvement of Shell when the government first insisted that InterOil find a major partner to operate a LNG project based on feedstock from Elk-Antelope.

The deal being negotiated with ExxonMobil is not what InterOil and Duma had originally foreseen, but market pundits have acknowledged the economic advantages for all parties involved of a tie-up with PNG LNG rather than a new standalone project.

InterOil’s original plan was to introduce a large company to operate the Gulf LNG project, which already had provisional government approvals.

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.

InterOil said PNG would benefit from its tie-up with ExxonMobil “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,” the company said.

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

'Tree' pid='25772' datel Wrote:What we have in the article are 'certain things confirmed' as you correctly call them, which by definition are not 'important new insights' and that is my point.

Tree, I agree with you.  I should have clarified that while the insights only confirm what InterOil has conveyed, they clearly are opposed to the opinions of the skeptics, which punished InterOil's stock by ~40 points for what should have been construed as a brilliant deal. Also, the confirmation from Exxon on their sense of urgency in closing is encouraging.

'Tree' pid='25768' datel Wrote:..... The only possible 'new insight' in this article is in the last sentence. P'nyang is OSH field which is not included in the PNG LNG gas agreements and are basically on equal footing and competing with E/A gas for PNG LNG expansion feedstock. Cost, delineation and speed to market all favor E/A over P'nyang. This is why XOM seeks E/A gas, P'nyang is not a best option for expansion gas.

I suspect you may be wrong here.

P'nyang gas is also owned partially by the 2 major partners of PNGLNG (XOM and OSH).

There is no reason why they would not use it as purchased external feedstock for the PNG LNG project , just the same as the E/A gas as purchased external feedstock also for the PNGLNG project.

OSH has always said (I have not tracked the XOM releases) in various documents that the P'nyang gas was going to be processed in the 3rd train at PNGLNG and that the PNGLNG partners were already doing the planning for this as the 3rd train.

The E/A gas was always planned as the 4th train as the PNGLNG plant is layed out to accept new trains in pairs as the most efficient build format.

Anyway we will know soon enough when the official releases happen.

Of interest , please dont hold me to it 100%, but I vagely remember reading  (I think it was in one of the OSH releases) that the new 3 an4 PNGLNG trains would not start being built untill the end of 2014 so that is why the final deliniation wells for P'nyang gas will only be started some time early in 2014. First LNG for 3 and 4  should therefore be some time in 2017.

'sydbod' pid='25786' datel Wrote:

'Tree' pid='25768' datel Wrote:..... The only possible 'new insight' in this article is in the last sentence. P'nyang is OSH field which is not included in the PNG LNG gas agreements and are basically on equal footing and competing with E/A gas for PNG LNG expansion feedstock. Cost, delineation and speed to market all favor E/A over P'nyang. This is why XOM seeks E/A gas, P'nyang is not a best option for expansion gas.

I suspect you may be wrong here.

P'nyang gas is also owned partially by the 2 major partners of PNGLNG (XOM and OSH).

There is no reason why they would not use it as purchased external feedstock for the PNG LNG project , just the same as the E/A gas as purchased external feedstock also for the PNGLNG project.

OSH has always said (I have not tracked the XOM releases) in various documents that the P'nyang gas was going to be processed in the 3rd train at PNGLNG and that the PNGLNG partners were already doing the planning for this as the 3rd train.

The E/A gas was always planned as the 4th train as the PNGLNG plant is layed out to accept new trains in pairs as the most efficient build format.

Anyway we will know soon enough when the official releases happen.

Of interest , please dont hold me to it 100%, but I vagely remember reading  (I think it was in one of the OSH releases) that the new 3 an4 PNGLNG trains would not start being built untill the end of 2014 so that is why the final deliniation wells for P'nyang gas will only be started some time early in 2014. First LNG for 3 and 4  should therefore be some time in 2017.

syd, the above is from the June Wood Mackenzie report on the IOC/XOM deal I posted.  The rub is neither P'nyang or E/A gas is part of the PNG LNG project or has an in place SPA or gas unitisation agreement in place.  The choice for XOM is to pursue delineation and agreements in higher cost remote P'nyang which requires a 120 km (from memory) pipeline to tie into existing infrastructure or buy much cheaper, easier to aggregate E/A gas.

http://shareholdersunite.com/mybb/showthread.php?tid=3974&highlight=wood+mackenzie

This report received little interest but it is chock full of great info.

Unitisation is a big deal and is why TOT/OSH are paying for work around Tri.  If Tri extends into their leases they will be part owners based on the reservoir locale.