01-20-2012, 10:09 PM
Tree, I have to say that about from the moment I became aware of InterOil (around the time of their Elk-1 discovery), this issue has puzzled me more than any. These are all multi-billion dollar projects (I believe Gorgon is budgeted at something like $50B) while pursuing unconventional gas sources (or off-shore gas) in a rather high-cost location (albeit one with advantages, like stability, although even here surprises could jump on investors like that super tax proposal).
In a way, it led me to be quite relaxed about InterOil and LNG prices and market conditions, as I believed that the trend towards globalizing the LNG market (still in early innings) would force a price floor at the marginal cost of the highest cost producers, which we were always going to beat, meaning InterOil would be almost guaranteed to prosper under most market conditions.
What I don't get is the leap of faith in investing tens of billions in these prospect. If Qatar wants, it could expand (although they might generate considerable problems with the Iranians as they share one of their two giant fields with them) and sort of wipe them out.
Of course, many of the Aussie projects already have sold most of their gas, so they do have some protection.
But I never really understood that these projects were taken as given just because they often involve big corporations and are located in Australia, while InterOil is in PNG. The simiple matter is, IOC's project economics makes waaay more sense, even if they'd gone the traditional route (Napa Napa).
In a way, it led me to be quite relaxed about InterOil and LNG prices and market conditions, as I believed that the trend towards globalizing the LNG market (still in early innings) would force a price floor at the marginal cost of the highest cost producers, which we were always going to beat, meaning InterOil would be almost guaranteed to prosper under most market conditions.
What I don't get is the leap of faith in investing tens of billions in these prospect. If Qatar wants, it could expand (although they might generate considerable problems with the Iranians as they share one of their two giant fields with them) and sort of wipe them out.
Of course, many of the Aussie projects already have sold most of their gas, so they do have some protection.
But I never really understood that these projects were taken as given just because they often involve big corporations and are located in Australia, while InterOil is in PNG. The simiple matter is, IOC's project economics makes waaay more sense, even if they'd gone the traditional route (Napa Napa).