Are there any clues from Oneill?

[jdeo1969]

I was searching for any clues from oneill's interviews and quotes in the last year or so that may tip his hand as to what he wants with regard to our gas.The following story was published in the National when IOC and XOM went exclusive.  I am not suggesting there are any conclusions to be drawn from the quotes from May, but I am going to reiterate my position that I believe Oneill wanted Exxon all along.  He announced the exclusive negotiations himself.  I found it interesting reading this article with the benefit of hindsight.  Just thought I would share to see if anyone else pulls something from these quotes from the PM, as to what he wants. The National, Monday 27th May 2013  THE developer of PNG LNG, ExxonMobil, is in exclusive talks with InterOil as a potential partner to develop its Elk and Antelope gas reservoirs in Gulf. Should the negotiations bear fruit, Gulf gas will be provide additional trains to the PNG LNG project, expand the Port Moresby processing plant and extend the project life from current 30 years to beyond 50 years. Prime Minister Peter O’Neill last Friday announced to Parliament the decision by InterOil to start talks with ExxonMobil.  “This is an important announcement for the development of these assets, and I’m certain all stakeholders will welcome this,” O’Neill said in a statement yesterday. “As a stakeholder, the government is pleased that InterOil and its partners are taking the next significant step towards the development of our vast natural gas resource. “When the full potential of the gas reservoirs in the Gulf province are realised, PNG will have in place a stable revenue flow from these resources for the next 30 to 50 years,” O’Neill said. InterOil announced last Friday that it had entered into an “exclusive negotiations” with ExxonMobil to develop the Elk and Antelope fields. O’Neill told Parliament the exclusive negotiations would run for 60 days after which a decision was expected on whether or not a deal was reached would be announced. InterOil advised the prime minister of the steps it was taking before it advised the market (stock exchange) last Friday (PNG time). The prime minister told a gathering last Friday evening that the potential entry of ExxonMobil to those assets in Gulf could significantly lift production at the PNG LNG processing facility outside Port Moresby. “At the moment we are building two trains (or processing units) at the processing site for gas from the Hela and Southern Highlands provinces. The revenue from the export of LNG from these two trains would double the size of our economy (GDP). “If the talks are successful and ExxonMobil gains access to gas from Elk and Antelope, we will certainly add one, possible two, more trains, and our GDP would triple in size. “This means PNG will have a stable revenue flow from its gas resources for the next 50 years or so.”  He said with global LNG demand estimated by market experts to rise to 500 tonnes a year by 2025, his government had worked hard to ensure PNG benefits fully by promoting PNG as a stable supplier of natural gas in a stable political environment with a robustly growing economy. He recently travelled to China and Japan, where PNG gas’ big buyers are located, to meet heads of governments there and held talks with investors seeking to enter and develop PNG’s vast natural resources potential. He is planning to travel to Indonesia next month and later to South Korea, Malaysia and Singapore. “I’m pleased that oil and gas global majors like ExxonMobil and Total see PNG as a stable supplier of energy (gas) to the world market. “ Their long term investment here is proof of that. “As a government, we will continue to provide a stable political climate, a fair tax regime, and sound development policies so that our people fully benefit from the development of these resources,” he said.

I was searching for any clues from oneill's interviews and quotes in the last year or so that may tip his hand as to what he wants with regard to our gas.The following story was published in the National when IOC and XOM went exclusive.  I am not suggesting there are any conclusions to be drawn from the quotes from May, but I am going to reiterate my position that I believe Oneill wanted Exxon all along.  He announced the exclusive negotiations himself.  I found it interesting reading this article with the benefit of hindsight.  Just thought I would share to see if anyone else pulls something from these quotes from the PM, as to what he wants.

The National, Monday 27th May 2013

 THE developer of PNG LNG, ExxonMobil, is in exclusive talks with InterOil as a potential partner to develop its Elk and Antelope gas reservoirs in Gulf.
Should the negotiations bear fruit, Gulf gas will be provide additional trains to the PNG LNG project, expand the Port Moresby processing plant and extend the project life from current 30 years to beyond 50 years.
Prime Minister Peter O’Neill last Friday announced to Parliament the decision by InterOil to start talks with ExxonMobil.
 “This is an important announcement for the development of these assets, and I’m certain all stakeholders will welcome this,” O’Neill said in a statement yesterday.
“As a stakeholder, the government is pleased that InterOil and its partners are taking the next significant step towards the development of our vast natural gas resource.
“When the full potential of the gas reservoirs in the Gulf province are realised, PNG will have in place a stable revenue flow from these resources for the next 30 to 50 years,” O’Neill said.
InterOil announced last Friday that it had entered into an “exclusive negotiations” with ExxonMobil to develop the Elk and Antelope fields.
O’Neill told Parliament the exclusive negotiations would run for 60 days after which a decision was expected on whether or not a deal was reached would be announced.
InterOil advised the prime minister of the steps it was taking before it advised the market (stock exchange) last Friday (PNG time).
The prime minister told a gathering last Friday evening that the potential entry of ExxonMobil to those assets in Gulf could significantly lift production at the PNG LNG processing facility outside Port Moresby.
“At the moment we are building two trains (or processing units) at the processing site for gas from the Hela and Southern Highlands provinces. The revenue from the export of LNG from these two trains would double the size of our economy (GDP).
“If the talks are successful and ExxonMobil gains access to gas from Elk and Antelope, we will certainly add one, possible two, more trains, and our GDP would triple in size.
“This means PNG will have a stable revenue flow from its gas resources for the next 50 years or so.”
 He said with global LNG demand estimated by market experts to rise to 500 tonnes a year by 2025, his government had worked hard to ensure PNG benefits fully by promoting PNG as a stable supplier of natural gas in a stable political environment with a robustly growing economy.
He recently travelled to China and Japan, where PNG gas’ big buyers are located, to meet heads of governments there and held talks with investors seeking to enter and develop PNG’s vast natural resources potential.
He is planning to travel to Indonesia next month and later to South Korea, Malaysia and Singapore.
“I’m pleased that oil and gas global majors like ExxonMobil and Total see PNG as a stable supplier of energy (gas) to the world market.
“ Their long term investment here is proof of that.
“As a government, we will continue to provide a stable political climate, a fair tax regime, and sound development policies so that our people fully benefit from the development of these resources,” he said.

[jdeo1969]

Perhaps I should explain why I have arrived at that conclusion. To my knowledge, O'neill is yet to speak publicly about the Total/IOC closing. OSH received their funds for the acquisition how? "Oil Search is pleased to announce the completion of its acquisition of the relevant Pac LNG Group Companies holding a 22.835% gross interest in Petroleum Retention Licence 15 (PRL 15), containing the Elk/Antelope gas discoveries in Papua New Guinea. The purchase was funded by a placement of 149.39 million fully paid ordinary shares to the Independent State of Papua New Guinea" http://news.smh.com.au/breaking-news-bus...33kyx.html

Is it possible that O'neill is working with OSH to "encourage" expansion for a third or fourth train without stating that publicly? Could the PSH acquisition of PACLNG interests be the brainchild of O'neill to steer things back towards Exxon?

From July of last year:

"Papua New Guinea’s Petroleum & Energy Minister William Duma has added a twist to the negotiations between InterOil and ExxonMobil over gas supplies into the US giant’s PNG liquefied natural gas project. Duma said the government is respectful of the commercial negotiations that are ongoing between the two energy companies, but emphasised that whatever agreement is reached must be within the parameters and project specifications contained in the 2009 Project Agreement between InterOil and the government. The focus of the discussions between InterOil and ExxonMobil is the acquisition by ExxonMobil of an equity stake in the permit that contains the Elk-Antelope gas discoveries operated by InterOil. The proposed deal would see ExxonMobil buy an interest in Block PRL-15 that would give it access to 4.6 trillion cubic feet of gas in order to build an additional train at PNG LNG. There is no suggestion of a new standalone LNG facility, which was the basis of the 2009 Project Agreement, and of the November 2012 Gulf LNG proposal which evidently was approved by the government. However, highly-placed sources said there is no certainty over the legal status of the 2009 agreement, and questioned Duma’s motives. Duma reiterated that the government intends to take up its ­legal entitlement of a 22.5% equity share in Block PRL-15. “At this stage, we do not know when the current negotiations ­apparently being conducted between InterOil and Exxon will be concluded. However, any final agreement must meet the project specifications contained in the 2009 Project Agreement,” said Duma. The 2009 agreement stipulated a two-train LNG facility, with each train capable of producing about 4 million tonnes per annum of LNG, based on feedstock from Elk-Antelope. Over subsequent years InterOil took the project through various guises without progressing to a final investment decision, and in 2012 the government insisted InterOil return to the original 2009 proposal. Last November, the government apparently endorsed a revised development model called the Gulf LNG Project and, in a surprise move, decided it wanted half the gas resources from the Elk-Antelope field for its domestic market. InterOil believes a tie-up with ExxonMobil will benefit PNG “in a number of ways” including the use of PNG LNG infrastructure to create strong synergies and cost savings, and allowing for early development of the Elk-Antelope fields. “InterOil believes that the economic benefits to the existing project partners and the country of Papua New Guinea are compelling.” Most market watchers are supportive of a tie-up between the two companies."

So IOC was at one point ok with the XOM partnership before Total stepped in with a better offer that as Hession stated that Total is going to pay them if they find more gas, protecting the upside, which was being capped by (inferred) Exxon in their talks. So now OSH is 10% owned by PNG. Oneill announced himself last year that IOC and XOM were exclusive. To my knowledge he has not commented publicly on the IOC/Total closing. Duma is gone, and was at once time advocating for someone other than XOM to avoid a monopoly. OSH has a 22% stake in PRL 15 and takes action to block the Total/IOC deal. Seems to me that O'neill and PNG want this gas to go to PNGLNG first. I still feel that's a huge win for the PPS, as it would mean quicker monetization.

On the flip side, Hession believes we have a lot of gas left to find, so in the meantime, he has signed Total, received $401 million for IOC's coffers to fund drilling, kept open the option of a second LNG plant, while not publicly committing to such. So let's send first gas to PNGLNG, and get a stake in the project, then go from there. That seems like a pretty good outcome from where I sit, in spite of, or perhaps because of this OSH move to block. Just my take.

[jft310]

The Exxon proposal that Byker worked on was for them to buy a module of gas. There was no LNG participation. Hession came in and killed the deal. The quote at that time was "We are not gonna give up our future for a quick deal today" . This is a battle over LNG participation rights. If Exxon wants our gas we must have LNG participation. The battle must be over how much..I think ONeil bangs heads and we sell some gas with LNG participation to PNGLNG. Then we find more and build our own plant. Everyone wins.

[jdeo1969]

The Exxon proposal that Byker worked on was for them to buy a module of gas. There was no LNG participation. Hession came in and killed the deal. The quote at that time was "We are not gonna give up our future for a quick deal today" . This is a battle over LNG participation rights. If Exxon wants our gas we must have LNG participation. The battle must be over how much..I think ONeil bangs heads and we sell some gas with LNG participation to PNGLNG. Then we find more and build our own plant. Everyone wins.

Understood JFT.  My point is larger here, that I believe Oneill wants XOM, and for that we need a pct of the PNG/LNG project.  And that this OSH move could move us in that direction. I am trying to illutrate that Oneill, like any politician, sees those numbers for GDP and has to think which route is fastest to realizing that.

[jft310]

Makes perfect sense

[Palm]

I agree. These are the things I've been pointing to for some time. I have yet to see in O'Neill's public statements since Dec 5th 2013 any acknowledgement of the IOC and Total deal(s). Nothing. This plus his sacking of Duma who opposed Exxon being involved based on anti-competitive grounds (and supported by ICCC concerns on same) seems to indicate a certain level of wanting to influence where PRL 15 gas goes. Does he want 100% of what it takes to max out the current PNG LNG plant first before building a new plant? Does he want first commitment on train 3, then a new plant can be built? We obviously don't know, but I agree that he was very excited (as well parliament outside of Duma) back in May when exclusive talks were announced.

The fact that even parliament was seen cheering the exclusive talks also says a lot IMHO. If that's still the case (that they favor Exxon) it's hard to know where the Total/IOC deal goes. But it seems outside of Polye and a few others they support the gov purchase of the OSH 10.1% stake.

We have the gas and the bigs want it. Hard to say now where it ends up going.

[CAC]

[quote='jft310' pid='40526' dateline='1396111721'] The Exxon proposal that Byker worked on was for them to buy a module of gas. There was no LNG participation. Hession came in and killed the deal. The quote at that time was "We are not gonna give up our future for a quick deal today" . This is a battle over LNG participation rights. If Exxon wants our gas we must have LNG participation. The battle must be over how much..I think ONeil bangs heads and we sell some gas with LNG participation to PNGLNG. Then we find more and build our own plant. Everyone wins.

Understood JFT.  My point is larger here, that I believe Oneill wants XOM, and for that we need a pct of the PNG/LNG project.  And that this OSH move could move us in that direction. I am trying to illutrate that Oneill, like any politician, sees those numbers for GDP and has to think which route is fastest to realizing that.

***************

I think that could be right JDEO.  But how does O'neil get us that percentage if XOM/OSH refuse to offer it? 

I think O'Neil is "quiet" because he is balancing his desire for the gas to go to the existing plant against a competing desire to avoid being perceived as heavy-handed.  He wants other companies to feel confident they can do business in PNG without fear.  He has tried to move PNG away from the corruption and back-ally dealings (remember his comments about Shell needing to come in through the front door?), so I doubt he wants to be seen as the direct cause of the TOT deal failing...even if that's what he would like to see happen.  

To have much effect, it seems to me that O'Neil's influence would need to be towards OSH/XOM moreso than towards IOC.  I am guessing that the exclusive negotiations with XOM would have ended with a deal if OSH/XOM would have shared enough plant-equity.  If we assume those negotiations failed because XOM wouldn't do so...the question might become...Can O'Neil influence XOM/OSH to meet or beat TOT's equity offer?  And even if XOM became willing to do so (either now...or after the OSH ploy fails to get the gas), what happens to the deal with TOT?

And even a complete buyout now seems unlikely to solve the dilemna from O'Neil's perspective.  If TOT buys IOC then they, rather than XOM, develop the gas.  And if XOM buys out IOC aren't they then second-fiddle to TOT (as IOC currently is under the new agreement) with regard to E/A? 

Maybe we actually do want the TOT deal voided (if we now think XOM has moved past their initial "low balling" negotiations)???  I have thought that "clarity" was right around the corner for about three years now...but this saga never seems to end.         

[jdeo1969]

  My point is larger here, that I believe Oneill wants XOM, and for that we need a pct of the PNG/LNG project.  And that this OSH move could move us in that direction. I am trying to illutrate that Oneill, like any politician, sees those numbers for GDP and has to think which route is fastest to realizing that.

***************

I think that could be right JDEO.  But how does O'neil get us that percentage if XOM/OSH refuse to offer it? 

I think O'Neil is "quiet" because he is balancing his desire for the gas to go to the existing plant against a competing desire to avoid being perceived as heavy-handed.  He wants other companies to feel confident they can do business in PNG without fear.  He has tried to move PNG away from the corruption and back-ally dealings (remember his comments about Shell needing to come in through the front door?), so I doubt he wants to be seen as the direct cause of the TOT deal failing...even if that's what he would like to see happen.  

To have much effect, it seems to me that O'Neil's influence would need to be towards OSH/XOM moreso than towards IOC.  I am guessing that the exclusive negotiations with XOM would have ended with a deal if OSH/XOM would have shared enough plant-equity.  If we assume those negotiations failed because XOM wouldn't do so...the question might become...Can O'Neil influence XOM/OSH to meet or beat TOT's equity offer?  And even if XOM became willing to do so (either now...or after the OSH ploy fails to get the gas), what happens to the deal with TOT?

And even a complete buyout now seems unlikely to solve the dilemna from O'Neil's perspective.  If TOT buys IOC then they, rather than XOM, develop the gas.  And if XOM buys out IOC aren't they then second-fiddle to TOT (as IOC currently is under the new agreement) with regard to E/A? 

Maybe we actually do want the TOT deal voided (if we now think XOM has moved past their initial "low balling" negotiations)???  I have thought that "clarity" was right around the corner for about three years now...but this saga never seems to end.         

[/quote]

CAC,

We are thinking along the very same lines.  I believe that Oneill is doing what you suggest, and that is to me a sign that things have changed in PNG under his leadership.  he is not forcing IOC/OSH/XOM/TOT to do anything, but to address your comment about his influence on XOM, I think that could definitely benefit IOC.  Our licenses are renewed, so he clearly sees IOC as a partner to PNG.  Perhaps he could help us get our equity in the plant by playing mediator.

To your point here,

"And even a complete buyout now seems unlikely to solve the dilemna from O'Neil's perspective.  If TOT buys IOC then they, rather than XOM, develop the gas.  And if XOM buys out IOC aren't they then second-fiddle to TOT (as IOC currently is under the new agreement) with regard to E/A? "

I believe a buyout is now MORE likely that the deal with total was inked, becasue in order to guarantee that the gas from PRL 15 goes to their plant, XOM has to have a majority interest.  If they were to buy our 35%, then they and OSH now own a majority of PRL 15.  This also puts pressure on Total to buy us out if they are dead set on their own PNG/LNG plant.  I may be thinking this through incorrectly from the legal standpoint of ownership, but on the surface that conclusion seems logical to me.

So to sum up, I believe this OSH action is going to make a complete buyout (with IOC sitting in a good position to entertain a bidding war between two Super Majors) more of a likelihood.

[CAC]

  My point is larger here, that I believe Oneill wants XOM, and for that we need a pct of the PNG/LNG project.  And that this OSH move could move us in that direction. I am trying to illutrate that Oneill, like any politician, sees those numbers for GDP and has to think which route is fastest to realizing that.

***************

I think that could be right JDEO.  But how does O'neil get us that percentage if XOM/OSH refuse to offer it? 

I think O'Neil is "quiet" because he is balancing his desire for the gas to go to the existing plant against a competing desire to avoid being perceived as heavy-handed.  He wants other companies to feel confident they can do business in PNG without fear.  He has tried to move PNG away from the corruption and back-ally dealings (remember his comments about Shell needing to come in through the front door?), so I doubt he wants to be seen as the direct cause of the TOT deal failing...even if that's what he would like to see happen.  

To have much effect, it seems to me that O'Neil's influence would need to be towards OSH/XOM moreso than towards IOC.  I am guessing that the exclusive negotiations with XOM would have ended with a deal if OSH/XOM would have shared enough plant-equity.  If we assume those negotiations failed because XOM wouldn't do so...the question might become...Can O'Neil influence XOM/OSH to meet or beat TOT's equity offer?  And even if XOM became willing to do so (either now...or after the OSH ploy fails to get the gas), what happens to the deal with TOT?

And even a complete buyout now seems unlikely to solve the dilemna from O'Neil's perspective.  If TOT buys IOC then they, rather than XOM, develop the gas.  And if XOM buys out IOC aren't they then second-fiddle to TOT (as IOC currently is under the new agreement) with regard to E/A? 

Maybe we actually do want the TOT deal voided (if we now think XOM has moved past their initial "low balling" negotiations)???  I have thought that "clarity" was right around the corner for about three years now...but this saga never seems to end.         

CAC,

We are thinking along the very same lines.  I believe that Oneill is doing what you suggest, and that is to me a sign that things have changed in PNG under his leadership.  he is not forcing IOC/OSH/XOM/TOT to do anything, but to address your comment about his influence on XOM, I think that could definitely benefit IOC.  Our licenses are renewed, so he clearly sees IOC as a partner to PNG.  Perhaps he could help us get our equity in the plant by playing mediator.

To your point here,

"And even a complete buyout now seems unlikely to solve the dilemna from O'Neil's perspective.  If TOT buys IOC then they, rather than XOM, develop the gas.  And if XOM buys out IOC aren't they then second-fiddle to TOT (as IOC currently is under the new agreement) with regard to E/A? "

I believe a buyout is now MORE likely that the deal with total was inked, becasue in order to guarantee that the gas from PRL 15 goes to their plant, XOM has to have a majority interest.  If they were to buy our 35%, then they and OSH now own a majority of PRL 15.  This also puts pressure on Total to buy us out if they are dead set on their own PNG/LNG plant.  I may be thinking this through incorrectly from the legal standpoint of ownership, but on the surface that conclusion seems logical to me.

So to sum up, I believe this OSH action is going to make a complete buyout (with IOC sitting in a good position to entertain a bidding war between two Super Majors) more of a likelihood.

***********

Very good point!! I had forgotten that the XOM shares (after a buyout of IOC) could combine with OSH and become the majority E/A owner.  This has to make TOT concerned.  Unless they just didn't see this scenario as a possibility, it makes me wonder even more why IOC (or even TOT) didn't do whatever it took to outbid OSH.  

[jdeo1969]

Kaliboo posted this on another thread earlier:

Which company is the better prize for Total to buy now? OSH or IOC??? Maybe both??? Hmmm. Nice opportunity to box XOM out of the game completely.

This speaks to the poker game I am supposing is going on. IOC is the smallest fish in the pond, so to speak, so they are the natural target. Which is why many here, myself included want to drill fast and prove up more resources. I am very hopeful this OSH maneuver is the catalyst that sets into motion the much ballyhooed "bidding war" that would reward IOC shareholders. I understand that there are many who do not want that to happen, but IOC seems to have a very good hand in this game.