Today's news sounded darned familiar, so I checked my files. This is from DownstreamToday.com posted October, 2011:
Australasia LNG / LPG News
Papua New Guinean (PNG) secretary for petroleum and energy, Rendle Rimua, has stated that PNG's parliament has approved IOC Shell as the preferred operator of the planned Gulf LNG Project due to the company's strategic alliance with NOC Petromin.
According to Rimea, Minister of Petroleum William Duma endorsed the move and stated that it was now the government's official position that Shell should become operator of the Elk and Antelope gas and condensate fields, which are currently operated by InterOil. The move follows InterOil's announcement on 30 September 2011 that it had retained Morgan Stanley & Company LLC, Macquarie Capital (USA) Inc. and UBSAGas as joint financial advisors to assist in soliciting and evaluating proposals from potential strategic partners in the Gulf LNG project, as well as selling stakes in the Elk and Antelope fields and other exploration tenements in the country. In the Upstream newspaper, Shell does not comment specifically on the Gulf LNG Project, but states that PNG is a good fit for Shell's upstream business and that the Shell-Petromin agreement was the first step towards Shell's re-entry into the country.
Significance: The announcement suggests that the former criticisms of the Gulf LNG project by Duma as "fragmented" and in breach of the 2009 project agreement may have been a means of exerting political pressure on InterOil to transfer operatorship and stakes in the project to Shell following the strategic alliance agreement made with Petromin, given that the minister was previously supportive of the project.
While InterOil is now complying with government demands to bring an internationally recognised partner into the project, there are doubts about whether the project will still be implemented in its current form. Shell will probably want to scale up the project to capture economies of scale, potentially through exploration of other onshore acreage in InterOil's portfolio or in the Gulf of Papua once partnering discussions between Shell and Oil Search are finalised in 2012. Scaling up the project could set back the start-up date and create contractual complications for InterOil, given that its partner Flex LNG has already invested USD500 million in equity in construction contracts for the floating LNG (FLNG) liquefaction facility, which along with an onshore modular LNG plant, comprises part of the current Gulf LNG Project.
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