Another important component of the near-term explosiveness of InterOil is the pervasive political and operational turmoil in the LNG industry. Chaos in Egypt and Syria has resulted in a rapid recent rise in crude oil, bolstering the spot price of crude linked LNG contracts. Importantly, in 2010, Egypt exported 7.1 MMtpa of LNG, accounting for 3% of gobal exports. Qatar, the world’s largest LNG exporter, is now undergoing a leadership transition after 18 years and is vulnerable to spreading uprisings in the region. “Nigeria’s export of gas has suffered a major setback as the Nigeria Liquefied Natural Gas (NLNG) said yesterday it had declared force majeure on its exports of liquefied natural gas as a blockade by the Nigerian Maritime Administration and Safety Agency (NIMASA) over a tax dispute, which entered its second week.” (http://www.thisdaylive.com/articles/nlng-declares-force-majeure-over-nimasa-s-blockade/152152/) Nigeria accounted for 18% of LNG exports in 2010.
By contrast, PNG has entered a very constructive and well controlled political era under PM Peter O’Neill and the country is far from the Middle East. The LNG landscape is materially improving, and with continued problems in Australia (including Woodside’s reduced production guidance last night), InterOil is about to have a big thematic tailwind to complement the transformational Exxon deal, which is close to being closed and announced.