Total’s Elk/Antelope stake secured after court throws out challenge

The outlook for a second standalone LNG plant in Papua New Guinea looks brighter after an arbitration panel dismissed a challenge to Total’s deal to join InterOil’s promising Elk and Antelope fields on Tuesday.

The International Chamber of Commerce arbitration panel in Singapore rejected shareholder Oil Search’s attempt to assert its pre-emptive right over Total’s agreement to farm into petroleum retention licence (PRL) 15, which covers the two onshore gas fields.

The decision puts to rest considerable uncertainty around the project – and speculation that, had the court sided with Oil Search and pushed Total out of the deal, it could have made way for ExxonMobil to farm in.

Oil Search is a partner in Exxon’s existing PNG LNG plant and has said the Elk/Antelope project could be developed more quickly and economically with Exxon involved, analysts at Bernstein Research noted on Tuesday.

However, the analysts argued Exxon’s involvement also posed risks to Elk/Antelope – causing delays in favour of first expanding PNG LNG, restricting the size of the Elk/Antelope plant to comply with Exxon’s higher threshold for reserves certification, or forcing InterOil to feed the gas into PNG LNG instead.

InterOil reached a long-awaited deal with Total in December 2013 after talks with Exxon fell through earlier that year. Total bought a 61.3% stake in PRL 15 from InterOil – leaving the Texan company with 14.3% – and took over as operator of the LNG project.

Leader of the Pac

The French major had also planned to buy the remaining shares from a joint venture known as the Pac LNG Group. However, Oil Search swooped in and bought the share before Total could close. Soon after, the Australian company asserted its pre-emptive rights.

Despite the arbitration, Total, InterOil and Oil Search have moved ahead with exploration and appraisal in the Elk and Antelope fields, as well as plans for an LNG plant that Total plans to start building in Q3 2017.

Peter O’Neill, Papua New Guinea’s prime minister, has shown support for the second plant, urging Total not to delay in response to the oil price decline. “It is currently a prudent time to invest in Papua New Guinea’s resources infrastructure in anticipation of a return to better pricing,” he said last week.

Port Moresby is also backing Exxon’s plans to add a third train to the 6.9 mtpa PNG LNG. The two sides signed a memorandum of understanding last month that clears the way for the JV to reach an FID by the end of 2017.