03-11-2013, 11:03 PM
pickboone take
The Exxon wild card and implications for IOC
.
On March 6, Exxon issued a presentation for its annual meeting in which the second "New Development" in the entire presentation is its PNG LNG Project. The fourth bullet on slide 32 of the presentation states, "Adding resource for a potential third train" and there's talk about adding additional trains beyond this.
On the previous day, an article in Islands Business included the following quote from Oil Search head Peter Botten, “If Oil Search was to keep growing in PNG it has to make major acquisitions and it has to buy the major companies”.
Given the marginal cost of adding LNG trains (a 2003 EIA paper estimates capital costs of less than $200 per ton of annual liquefaction capacity for trains at existing plants) and the accelerated time horizon for commencing new production at PNG LNG, InterOil's gas should be worth way more than the ~$3 per mcf at which PNG LNG transactions have occurred in the past. XOM's ~7 mtpa plant will cost almost $20 billion, but if an additional train costs even $500 per ton to build, that would equate to less than $2 billion. Adding another $500 million for the pipeline, XOM and OSH could theoretically increase PNG LNG's capacity by 50% for an additional investment of 10-15% of its cost for the first 2 trains.
The XOM & OSH option has major potential implications for not only the Elk/Antelope sell-down, but also for Triceratops and for increasing the probability that IOC will soon be acquired. For those who listened to XOM's annual meeting presentation, you would know how upbeat XOM is on PNG at the moment
The Exxon wild card and implications for IOC
.
On March 6, Exxon issued a presentation for its annual meeting in which the second "New Development" in the entire presentation is its PNG LNG Project. The fourth bullet on slide 32 of the presentation states, "Adding resource for a potential third train" and there's talk about adding additional trains beyond this.
On the previous day, an article in Islands Business included the following quote from Oil Search head Peter Botten, “If Oil Search was to keep growing in PNG it has to make major acquisitions and it has to buy the major companies”.
Given the marginal cost of adding LNG trains (a 2003 EIA paper estimates capital costs of less than $200 per ton of annual liquefaction capacity for trains at existing plants) and the accelerated time horizon for commencing new production at PNG LNG, InterOil's gas should be worth way more than the ~$3 per mcf at which PNG LNG transactions have occurred in the past. XOM's ~7 mtpa plant will cost almost $20 billion, but if an additional train costs even $500 per ton to build, that would equate to less than $2 billion. Adding another $500 million for the pipeline, XOM and OSH could theoretically increase PNG LNG's capacity by 50% for an additional investment of 10-15% of its cost for the first 2 trains.
The XOM & OSH option has major potential implications for not only the Elk/Antelope sell-down, but also for Triceratops and for increasing the probability that IOC will soon be acquired. For those who listened to XOM's annual meeting presentation, you would know how upbeat XOM is on PNG at the moment