Lowest Cost Producer = CAPEX + gas cost - condensate sales

[Tree]

IOC's cost to produce 1/Mcf of LNG and load it on a carrier UNDER a BUCK ($.83/Mcf)!

MacQ Research - 2011:

They note dry gas is key for low project cost, IOC's dry gas cost is negative -.84/Mcf after condensates are harvested.

IOC's condensate production is worth at least $1.54/Mcf. per MacQ.  Got that everybody??

Moving toward the front of the LNG development queue.  The capital costs of Interoil‟s LNG development rank the lowest of all currently proposed or under-construction projects on both an absolute and per-unit basis. The lower cost structure makes the project price competitive and we expect it will allow early market penetration. Break-even gas price Our development model shows that InterOil would require a natural gas price of US$(0.84)/mmcf for the initial 2 mtpa project to return a 15% IRR. The negative price is due to the revenue generated by stripping liquids. Liquid Niugini Gas has estimated that excluding this subsidy, the project would still only require a US$0.70/mmcf FOB natural gas price to generate a 12% IRR. Gulf LNG gas price Gulf LNG Natural Gas price of US $.12/mmcf, with condensate subsidy, for a 12% IRR.  PNG LNG $7+/mmcf Liquids revenue enhancement. The proposed condensate stripping facility also allows for the extraction of high value condensate. We estimate that the stripping of liquids significantly enhances economics of this project. Given the already low cost structure, the liquids return actually makes the break-even gas price negative. CSP operating cost. We expect operating costs for the CSP will approximate US$14/bbl. In order to generate a 12% IRR, we expect the CSP will charge the upstream operators US$32.50/bbl. Should Mitsui elect not to swap their interest in the CSP project for a 2.5% interest in the Elk and Antelope Field, we understand that this charge could rise above US$50/bbl.

Let's IOC's $ LNG/M cost.  All figures per M:

CAPEX  + OPEX   + DRY GAS COST   =  $/M produced LNG

$1.24      +    $.43    +      ( -$.84)                  =   $.83/Mcf

$.83/Mcf is close enough to the 3 yr. old charts showing Gulf LNG break-even FOB of $.7/Mcf (which was based solely on 2 Mtpa EWC start-up)

Moving toward the front of the LNG development queue. 

The capital costs of Interoil‟s LNG development rank the lowest of all currently proposed or under-construction projects on both an absolute and per-unit basis. The lower cost structure makes the project price competitive and we expect it will allow early market penetration.

Break-even gas price

Our development model shows that InterOil would require a natural gas price of

US$(0.84)/mmcf for the initial 2 mtpa project to return a 15% IRR. The negative price is due

to the revenue generated by stripping liquids. Liquid Niugini Gas has estimated that

excluding this subsidy, the project would still only require a US$0.70/mmcf FOB natural gas

price to generate a 12% IRR.

Gulf LNG gas price

Gulf LNG Natural Gas price of US $.12/mmcf, with condensate subsidy, for a 12% IRR.  PNG LNG $7+/mmcf

Liquids revenue enhancement.

The proposed condensate stripping facility also allows for the extraction of high value condensate. We estimate that the stripping of liquids significantly enhances economics of this project. Given the already low cost structure, the liquids return actually makes the break-even gas price negative.

CSP operating cost.

We expect operating costs for the CSP will approximate US$14/bbl. In order to generate a 12% IRR, we expect the CSP will charge the upstream operators US$32.50/bbl. Should Mitsui elect not to swap their interest in the CSP project for a 2.5% interest in the Elk and Antelope Field, we understand that this charge could rise above US$50/bbl.