PNG influence

[Brew Swillis]

If there was any doubt how much influence the govt of PNG has in these negotiations it has been removed.  The OSH/Pac LNG deal appears to have been a last-second decision and was almost certainly driven by O'Neill and co.  They saw they were not going to get their IPIC shares back but managed to secure an investment in Oil Search by taking another route.  Play nice with PNG and you will be rewarded.

[ArtM72]

Brew -

I agree that there was heavy government pressure and involvement in this deal and they have done very, very well accordingly. Now I'm not sure if O'Neill shouldn't have given Duma a gold medal instead of a pink slip. Maybe this was all O'Neill's doing and the only way he could close it was to fire Duma. We'll never know.

[Palm]

Brews, this is a very important point for more than one reason, but the main one is what's been going on in Parliament lately and some of it related to The Opposition and I think Duma.

There has been a flag raised by The Opposition stating that O'Neill would make a big blunder if he let the OSH shares be kept by IPIC, as if the PNG Government really had any say on the matter in the end. It's been clear for some time (if you have kept up with the IPIC proceedings) that the choice was 100% IPIC's as to whether they retained the OSH shares per the exchange bond terms. But I think O'Neill felt it still important to have ownership in OSH for several reasons, but one is to be able to combat what the Opposition is saying. O'Neill needed this to happen as well as having the IOC/Total deal get closed quickly.

I believe there may be some thinking on the part of the government that they may be able to take a few % less in direct ownership in PRL 15 because they have the indirect ownership through OSH now. It would have been ideal to be able to get the OSH shares back from IPIC, but that deal was made by Artie Somare back in 2009; it was not O'Neill's baby. The Provincial ownership in PRL will most likely still be 2%, but the National Government's share could be reduced a little to make things all work. Again, the 22.835% IPI interest most likely is the strategic partner share that Total mentioned to be eventually at 19.6%. IMHO they will get all of the final %s worked out between now and closing, but with the March 5th IPIC deadline loomimg they wanted to get this IPI issue taken care of, get OSH in as the strategic, and get the Government a share of OSH in the end. We now have to wait for the final parts to get worked out and then see what we have.

[Brew Swillis]

Palm,

The notion of PNG giving up a % crossed my mind but for some reason I was under the impression that their ownership % was legislatively mandated or something to that effect.  Is it negotiable?

TIA

[Brew Swillis]

Also, something I touched on in another thread, Duma has clearly been stalling knowing O'Neill promised the world which jeopardizes the govt's ability to generate the necessary revenue.  Is that the behavior of a team player or an ambitious, back-stabbing politician?

[Palm]

Palm,

The notion of PNG giving up a % crossed my mind but for some reason I was under the impression that their ownership % was legislatively mandated or something to that effect.  Is it negotiable?

TIA

Brews,

The government can opt in "up to" their maximum 19.5% (or whatever) % and get in at sunk cost.  They can decide to go in at 0% or anything up to that 19.5% per the O&G Act.

[Brew Swillis]

Brews,

The government can opt in "up to" their maximum 19.5% (or whatever) % and get in at sunk cost.  They can decide to go in at 0% or anything up to that 19.5% per the O&G Act.

Ah yes, now I recall that language.  I'd be surprised if Interoil ended up with less than their desired 30%, all parties involved appear to be acting in good faith, Total has made it clear they want a smaller stake and now we have the govt option.  TWT.

[ArtM72]

You really have to take your hat off to the PNG government and OSH. Since negotiations for the buyback of its shares from IPIC were going so badly they just told OSH to sell them new shares and base the sales on a new resource acquisition, E/A. Pretty smooth.

When you read about the deal at OSH's website

http://www.oilsearch.com/Media/docs/1402...222f-0.pdf

you realize how certain the development of these resources will be. The speed of their development will only be limited by their engineer, contractors, suppliers and whatever infrastructure development is necessary for the project to proceed. IOC, with all of its work to date certainly has set the table for very expeditious development.

[jft310]

Palm nailed it in this thread