Tapping China Loan

[jft310]

Justin- Interesting thought process. We know the company has stated each train will have seperate make up of partners like Trindad. So since thats the way thing happen why couldn't IOC sell a % of the first train to someone??Hire an independent operator would class like Petofac or Gasfin and even sell a portion of train 1 to a PRE or any of the mentioned bidders??

[Spartina]

Ebster -Later today we should know more. The time difference hurts good reporting.

up $1.34 in premarket

[ArtM72]

Justin - It is only speculation that the 1st train will have no PNG involvement, maybe wishful thinking. If there is anything fundamental about the 50% buy-in at market price it is PNG's interest to drive that price down. At the simple 22.5% ownership on the other hand it was in PNG's interest to drive the price up.

I too am in for the long haul, and while at my risk tolerance level may add a little if there is in fact a short raid. One thing has become very clear and that is there are a whole lot of issues being dealt with by a people who are in the midst of a major cultural revolution and whose bureaucracy is generally ill equipped to handle all of the challenges. Personally, I believe Mulacek and his team have done a remarkable job.

[Palm]

Not more levels of uncertainty. Not a reason to expect delays. Not something that hasn't already been discussed. Look back at some of the stories that have been posted since O'Neill was sworn in. He spoke about reorganization the very day he was sworn in. Petro mentioned this quite some time ago. O'Neill said departments would be scrutinized and reorganized; he said non-performers would be gotten rid of. Last week the MRA head mentioned how good it would be for the DPE to be better organized to be more transparent. This has been in the works since August and is not a big deal.

O'Neill has already put in place the 2 commissions to get the specifics worked out. Really nothing more than reorganization to split types of projects (Minerals and Petroleum) to align with the different royalty and tax structures of each as well as ownership interests of the State/Provinces. Investments and funding can be much more easliy done and risks rest in respective companies. Really no rocket science with this.

[sfiaes]

"Now that the 1st train will have no involvement from PNG is there anything to stop the SD on E/A happening now regardless of what PNG decides"

My understanding is they could indeed announce a sell down partner on the first train, but that nothing can go forward until they have a signed PA with the details regarding sell down to the government.

[jft310]

sfiaes-The government has agreed to pay the commercial price.So one can conclude that one measure of the commercial price would be the sell down price of the first train. Somehow the PRE price at Triceratops also helps set the price even though they paid a premium price.Or in order for the govt to close the PA ,IOC needs a sell down price . Sounds like the next news could be a sell down name and price. One of those super majors, NOC's or Utility cos. Phil stated in the Bloomberg article that they have narowed the list down.Sounds like progress.

[Getitrt2]

Jft, I often appreciate your information. However, maybe, ????, sounds like....are not definitive. I agree with Art that more uncertainty and this will likely bring another short raid. Batten down the hatches again.

You guys need to remember that PNG is electing to opt out of Gulf LNG initial 4mtpa start-up and would have in essence no financial obligation at this time.

That may or may not be, tree.  See my previous comments per below:

My understanding of all this is as follows. It now appears that PNG will want to exercise its option for an additional 27.5% equity (total 50%) in E/A up front and take it all in conditioned gas, while not participating in the initial 3.8+ mtpa LNG plant to be built by IOC and its new partner(s). This means the initial CSP capability will need to be double what will be required for IOC's Gulf LNG, with the timing of PNG's half dependent upon when they can get power plants and/or a separate LNG facility, etc. in place. It also sounds like Mitsui could end up building all, half, or none, for which FEED is done. I don't think IOC's having and providing enough gas for all is an issue. For PNG's first 22.5% they would be obligated for that proportion of all the costs of E/A development and the CSPs, in return for 22.5% of the conditioned gas. For the additional 27.5% of raw gas they would pay the agreed commercial market price per mcf or other unit, almost certainly based on the price to be paid by IOC's selected bidder, with some possible variation related to payment terms, etc., and maybe some adjustment for differences in handling of condensates between PNG and other partners. They would also be obligated for another 27.5% of the costs (capex and operating) of the CSPs, or possibly they could arrange for their own separate CSPs for their 50% rather than contributing the two proportions for those facilities. Of course, they would have no ownership in nor contribute to the costs of the Gulf LNG plant.

Of course, PNG will use some portion as determined by them of their gas for power production as discussed elsewhere. Other possible options they may pursue:
-to feed industrial plants of some sort.
-for an LNG project between Petromin and partner Shell. This conforms to their desire to develop Petromin as an NOC.
-for sale to PNG LNG for some period of time.
-for an LNG project with some Chinese or other partner.

Funding for PNG's gas purchases from IOC and/or CSPs could come from their Chinese loans, banks, and/or various project partners.

This certainly looks like a win/win to me. For IOC, it looks like they are going to have more gas before long than they know what to do with; and all this monetizes more gas and generates more cash flow sooner, including allowing it and its sell down partner(s) to develop the Gulf LNG project in the phased manner they consider best, and own 100% of the first phase, as well as apparently getting IOC better bids in the sell down process! If I understand all this properly, the more I learn, the better it sounds for PNG and for IOC and its shareholders. Dang! I wonder how that could be, with this "terrible", "fraudulent" management with so much ownership!!

[bertl05]

Later rather than sooner...always expect that, ledd disappointment.

[Tree]

Jft, I often appreciate your information. However, maybe, ????, sounds like....are not definitive. I agree with Art that more uncertainty and this will likely bring another short raid. Batten down the hatches again.

You guys need to remember that PNG is electing to opt out of Gulf LNG initial 4mtpa start-up and would have in essence no financial obligation at this time.

That may or may not be, tree.  See my previous comments per below:

My understanding of all this is as follows. It now appears that PNG will want to exercise its option for an additional 27.5% equity (total 50%) in E/A up front and take it all in conditioned gas, while not participating in the initial 3.8+ mtpa LNG plant to be built by IOC and its new partner(s). This means the initial CSP capability will need to be double what will be required for IOC's Gulf LNG, with the timing of PNG's half dependent upon when they can get power plants and/or a separate LNG facility, etc. in place. It also sounds like Mitsui could end up building all, half, or none, for which FEED is done. I don't think IOC's having and providing enough gas for all is an issue. For PNG's first 22.5% they would be obligated for that proportion of all the costs of E/A development and the CSPs, in return for 22.5% of the conditioned gas. For the additional 27.5% of raw gas they would pay the agreed commercial market price per mcf or other unit, almost certainly based on the price to be paid by IOC's selected bidder, with some possible variation related to payment terms, etc., and maybe some adjustment for differences in handling of condensates between PNG and other partners. They would also be obligated for another 27.5% of the costs (capex and operating) of the CSPs, or possibly they could arrange for their own separate CSPs for their 50% rather than contributing the two proportions for those facilities. Of course, they would have no ownership in nor contribute to the costs of the Gulf LNG plant.

Of course, PNG will use some portion as determined by them of their gas for power production as discussed elsewhere. Other possible options they may pursue:
-to feed industrial plants of some sort.
-for an LNG project between Petromin and partner Shell. This conforms to their desire to develop Petromin as an NOC.
-for sale to PNG LNG for some period of time.
-for an LNG project with some Chinese or other partner.

Funding for PNG's gas purchases from IOC and/or CSPs could come from their Chinese loans, banks, and/or various project partners.

This certainly looks like a win/win to me. For IOC, it looks like they are going to have more gas before long than they know what to do with; and all this monetizes more gas and generates more cash flow sooner, including allowing it and its sell down partner(s) to develop the Gulf LNG project in the phased manner they consider best, and own 100% of the first phase, as well as apparently getting IOC better bids in the sell down process! If I understand all this properly, the more I learn, the better it sounds for PNG and for IOC and its shareholders. Dang! I wonder how that could be, with this "terrible", "fraudulent" management with so much ownership!!

IOC will still be carrying those upstream costs Getit.  Those PNG Gov't costs will likely be back loaded as was previously arranged.  The point is, IOC and LNG partners will not have to carry PNG in the first 3.8Mtpa plant as they will have no interest.

[Getitrt2]

tree, I agree with your last statement about the first LNG plant, and consider that very important, as addressed in my posting. As far as the rest, as I also said, "may or may not be". I consider the comment in the article, "He also expressed confidence that Papua New Guinea would be able to finance a higher share of InterOil Corp.’s natural gas assets following an agreement reached in November." as very interesting, in conjunction with the Chinese financing, and an indication IOC may get substantial amounts up front, including CSP funding, and beyond that at least simultaneously with the gas. Thanks for the article. We shall see what the current negotiations on the final PA produce, hopefully soon.