Western Province: Eaglewood license shows the O'Neill way

[Palm]

Since December O'Neill has been pressing petroleum projects to look at aggregating resources under the least expensive and fast-to-market way.  Licenses granted to Eaglewood by the government show that he is serious about it.  O'Neill has also stated that for the good of PNG he wants to see locals be involved in owning parts of projects and downstream businesses included in plans.  This license granted also has that requirement.

"Gas firm offered licences"

Source:

The National, Tuesday March 18th, 2014

By GYNNIE KERO
CANADIAN oil and gas exploration company Eaglewood Energy Inc said it has been offered a strategic processing facility licence (APPFL 3) and strategic pipeline licence (APL 9) in Western.
Chief executive Brad Hurtubise (pictured) said: “We (Eaglewood) are very pleased to have been offered these licences.
“They are the first petroleum infrastructure licences to be awarded in Western, Papua New Guinea and as such, they are a significant milestone as Western transitions to becoming the next petroleum producing province in PNG.
“The licences are also the first petroleum infrastructure permits in Papua New Guinea to be offered the “strategic” designation under the PNG Oil and Gas Act”.
Hurtubise said the strategic designation of these licences will ensure transparent and open access to production infrastructure in this area of Western.
“In addition to processing and transporting hydrocarbons from Ubuntu and PRL 21 fields, any additional available capacity in the system will permit further discoveries in the area to be developed in a more cost effective way and in a shorter timeframe, creating positive outcomes for Eaglewood, our partners, other companies in the area and the state of PNG.”
Final grant of the licences was subject to a number of condition precedents, the most significant of which was the establishment of a project agreement between Eaglewood and the state.
The licences would grant Eaglewood the right to construct and operate a strategic gas condensate processing facility close to the Ubuntu discovery (PRL 28 – Eaglewood, Talisman Energy, Mitsubishi, MFI) and Elevala, Tingu and Ketu discoveries (PRL 21 – Horizon Oil, Talisman Energy, Mitsubishi, Kina Petroleum) and a strategic pipeline to deliver the condensate from these fields to a location on the Fly River from where it will be shipped to market.
As announced previously, Eaglewood has a participation agreement in place with Trafigura PTE Ltd, whereby the two companies are working together with a view to jointly financing and owning the pipeline and processing facility.
-Other investors, including the state, landowner companies, local participating upstream companies, infrastructure funds would also have an opportunity to participate in the ownership of this infrastructure.
Investors, including the state, landowner companies, local participating upstream companies, infrastructure funds have an opportunity to participate in the ownership of this infrastructure."

[jft310]

Palm-Could this be a model for Gulf province??Or is Gulf much larger and they have larger plans.??

[Palm]

This licensing I think shows how O'Neill and NEC see development in the future. Note that the "strategic" designation is very important because it means infrastructure and things like CSPs are to built for use by aggregated resources. This shows how serious they are about maximizing plants/infrastructure to minimize investment and maximize cash flow. IOC's license corridor development likely will have different players owning PRLs but sharing "strategic" licenses. If you look at what Eaglwood says, they have two PRLs (PRL 28 and PRL 21) which have different players (except for Mitsubishi), but they will share a CSP and pipeline under terms to be worked out. It could be that that type of discussion is going on now between IOC, Total, OSH and Exxon with the government holding the "heavy" of strategic licenses over their heads.

[Spartina]

Good stuff Palm, thanks.

[jft310]

Palm-yes I see this strategic designation as very important sort of strategic. HoHo. Clear that what ever minimizes investment costs and maximizes cash flow for the govt also does the same for Interoil and its shareholders. The govt is the puppeteer here. Not Total not Exxon etc. What's best is the question? As the govt wins so do Interoil shareholders. O'Neil wants a National Oil Co like PETRONAS for PNG. Cash flow for the govt is cash flow for Interoil.

[jft310]

Using the Englewood deal as a model one of best use of dollars should be gas for train 3 Exxon. The provider of the gas is well treated when allocation of LNG participation are decided using OSH as a model. Could IOC trade its gas ownership for LNG participation??Lots of possibilities.

[Palm]

Yep, back on December 3rd when addressing the PNG Petroleum and Mining conference his office released this:

"The PNG Prime Minister details how the Government has embarked on a new economic direction for the country - one that follows the more state-directed path of many Asian countries.

He admires Government-owned conglomerates such as Singapore's investment house, Temasek, with $190 billion in assets, and Malaysia's resources corporation Petronas, with $175bn. He says: "In countries like ours, where the economy is not fully developed, but with a fast-growing population and high youth unemployment, we need to create industries that will engage them more fully. Other countries around the world have taken that approach."

O'Neill points out that Peru and Chile also have major mining companies that are fully owned by the state. "As long as we create a business model which is managed outside the public service structure, and governance issues are addressed properly, the opportunity will yield good returns for our country." Several Asian countries, he says, "have succeeded economically with very limited resources. We have an abundance. Our only problem has been our management of them".

"If we structure well, there is no reason why we shouldn't succeed as they have done, with professional managements and independent boards, and an ability to achieve global branding." PNG has two trains of liquefied natural gas under way via the $19.5bn ExxonMobil-led project coming on stream next year, and O'Neill expects the gas resources controlled by Interoil to provide a further two trains. And a deal is moving closer whereby Interoil will obtain a major international partner; probably by Christmas, O'Neill expects.

This would create an LNG hub in PNG almost the size of Australia's North West Shelf, which has five gas trains."

[jft310]

It appears that we do not have a battle over Interoil's gas Exxon or Total??? but a govt mandate on how it will be monetized. Its not bad but good. The resources of 2 Super Majors and OIl Search to help us get to the goal posts.

[Palm]

And on the PNG Chamber of Mines and Petroleum website they talk about an aggregation of resources in Western Province to feed the Stanley project. Note that they mention P'nyang as possibly being aggregated with other resources to feed that project:
"Other Potential Gas Commercialisation
The LNG project is an enormous achievement for PNG and is expected to be the first of a series of potential gas developments, notably the Interoil condensate stripping/LNG project centred on the Elk/Antelope discoveries close to the lower Purari River in Gulf Province; the Stanley condensate stripping project; the possible aggregation of a number of gas accumulations in Western Province such as P'nyang, Stanley, Douglas/Puk Puk, Elevala/Ketu, Kimu and possibly the offshore Pandora field for an LNG development; and the Oil Search expansion strategy."

[Getitrt2]

Also note that they speak of the "InterOil condensate stripping/LNG project centered on the Elk/Antelope discoveries" as a totally separate development/project.