04-06-2013, 03:05 AM
"Art- I do not think the delay of the drilling of Elk-3 had anything to do with the rig or rig equipment. I think it had to do with the selection of the new partner and/or availability of cash."
100% agree with this Pet, and here's why.
1. We know that IOC and DPE/Duma agreed to delay the spudding of Elk-3 to conserve cash; neither IOC nor PNG had cash to sling around back in November when this was agreed to.
2. To spud a well a developer needs the permission of DPE for obvious reason; there are strict conditions for logistics, communications, site and work-camp setup and also the government is on the line for its eventual share of costs should the project be successful and a PDL granted. The government said "Wait" and IOC must do so until the government says it's OK to proceed.
So it now appears that the gov't may have given the indication to proceed with Elk-3. What's gotten them to the "ready" stage? I think that the preferred partner(s) has been decided based on the visit to Japan, and possibly Thailand's visit to PNG. We know that the ambassador of PNG to Japan signed the JAPEX agreement, not Kalinoe, which was the big tip that confirmed Petromin was going to be dismantled, and that's now happened. We also know that part of that JAPEX agreement was to use in-kind gas to replace the diesel-powered power generators in Port Moresby. So I think PNG is signaling one of two things; either JKM is the main partner for all of Gulf LNG, or they have chosen JKM for their portion of the project and JKM will help them take x% of the project and use the in-kind conditioned gas:
"to be used in part in domestic power generation and natural gas related industries thereby providing a boost to PNG’s standard of living, healthcare, growth and prosperity". This comes from LNGL's presentation at the Mining and Petroleum Conference back in December. In that presentation it also states, "State secures 22.5% of E&A equity gas in kind, a first for PNG, InterOil understands that the State intends to take its entitlement to gas from the project in kind,". See slides 7-10 of:
http://www.interoil.com/iocfiles/documen...202012.pdf
With that 22.5% statement above I think this thing is leaning toward what Stavros has said, 22.5% is what PNG will elect, and with that they will have more than enough in-kind gas for these projects, and JKM will likely be doing this, in light of the agreement signed in Japan. PNG is unlikely to elect anything above the 22.5% for reasons we have mentioned several times; mainly cost. On slide 8 of that presentation it states, "All parties agree that up to an additional 27.5% equity interest in the Elk/Antelope gas fields, over and above the 22.5% interest, can be purchased based on certified volumes and market prices." Unless there is a huge need for in-kind gas above the 22.5% (highly unlikely) anything above that % will be expensive.
For these reasons I think the Elk spudding news means this project is ready to roll, JKM will be the "horse" and the government and IOC feel very comfortable that the funds will be readily available to get the bit turning at Elk. Risk is likely something they are now looking at in the rear view mirror.
100% agree with this Pet, and here's why.
1. We know that IOC and DPE/Duma agreed to delay the spudding of Elk-3 to conserve cash; neither IOC nor PNG had cash to sling around back in November when this was agreed to.
2. To spud a well a developer needs the permission of DPE for obvious reason; there are strict conditions for logistics, communications, site and work-camp setup and also the government is on the line for its eventual share of costs should the project be successful and a PDL granted. The government said "Wait" and IOC must do so until the government says it's OK to proceed.
So it now appears that the gov't may have given the indication to proceed with Elk-3. What's gotten them to the "ready" stage? I think that the preferred partner(s) has been decided based on the visit to Japan, and possibly Thailand's visit to PNG. We know that the ambassador of PNG to Japan signed the JAPEX agreement, not Kalinoe, which was the big tip that confirmed Petromin was going to be dismantled, and that's now happened. We also know that part of that JAPEX agreement was to use in-kind gas to replace the diesel-powered power generators in Port Moresby. So I think PNG is signaling one of two things; either JKM is the main partner for all of Gulf LNG, or they have chosen JKM for their portion of the project and JKM will help them take x% of the project and use the in-kind conditioned gas:
"to be used in part in domestic power generation and natural gas related industries thereby providing a boost to PNG’s standard of living, healthcare, growth and prosperity". This comes from LNGL's presentation at the Mining and Petroleum Conference back in December. In that presentation it also states, "State secures 22.5% of E&A equity gas in kind, a first for PNG, InterOil understands that the State intends to take its entitlement to gas from the project in kind,". See slides 7-10 of:
http://www.interoil.com/iocfiles/documen...202012.pdf
With that 22.5% statement above I think this thing is leaning toward what Stavros has said, 22.5% is what PNG will elect, and with that they will have more than enough in-kind gas for these projects, and JKM will likely be doing this, in light of the agreement signed in Japan. PNG is unlikely to elect anything above the 22.5% for reasons we have mentioned several times; mainly cost. On slide 8 of that presentation it states, "All parties agree that up to an additional 27.5% equity interest in the Elk/Antelope gas fields, over and above the 22.5% interest, can be purchased based on certified volumes and market prices." Unless there is a huge need for in-kind gas above the 22.5% (highly unlikely) anything above that % will be expensive.
For these reasons I think the Elk spudding news means this project is ready to roll, JKM will be the "horse" and the government and IOC feel very comfortable that the funds will be readily available to get the bit turning at Elk. Risk is likely something they are now looking at in the rear view mirror.