The waiting game

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The waiting game

Blair PriceMonday, 28 October 2013 AN OUTCOME to the various commercialisation talks over InterOil’s Elk-Antelope discoveries has proven to be quite elusive so far. There was considerable industry hope that ExxonMobil would land a deal to acquire 4.6 trillion cubic feet of gas from the Elk-Antelope field to underpin a third train expansion of the PNG LNG project. The PNG LNG operator and InterOil entered into exclusive negotiations in late May with Prime Minister Peter O’Neill telling Parliament they would last for up to 60 days. Two months rolled on without any breakthrough. A significant snag seemed to have emerged in early August with Petroleum Minister William Duma siding with Gulf Province parliamentarians over their wish to keep Elk-Antelope gas processing in the province. It clashed with Exxon’s preferred option to pipe about half of this field’s gas to its PNG LNG facilities in the Southern Highlands region. PNGIndustryNews.net broke the news later that month that the exclusivity arrangements for the talks between Exxon and InterOil had lapsed. It allowed InterOil to restart talks with other candidates. Supermajors Total SA and Royal Dutch Shell are believed to have previously submitted bids. Not long after, an industry source told PNGIndustryNews.net that it was a “fairly open race”. Further updates since have proven hard to come by, however, ExxonMobil’s PNG subsidiary Esso Highlands appears to still be on the negotiating table. In an interview with ABC Radio Australia in September, Esso Highlands managing director Peter Graham discussed the potential for Elk-Antelope to host enough gas to provide “at least” one additional PNG LNG train. The field has 9.07Tcf of initial recoverable sales gas, according to GLJ Petroleum Consultant’s best-case estimate and the PNG LNG chief hinted that further drilling was required. “I think before any expansion project goes forward based on any resource, there is going to need to be a definition of what reserves are available and that’s true as well for the Elk-Antelope resource,” Graham said on air. While Exxon has previously revealed it has enough space for five trains at PNG LNG’s plant site near Port Moresby, Graham said a phased expansion of “one train at a time” was most likely. “We are optimistic and we have a very active program underway to move expansion plans forward as fast as we practically can,” he told Radio Australia. While he told the program there were additional gas prospects in three provinces, only InterOil’s Elk-Antelope field in Gulf province was discussed on air. Later that month O’Neill told the PNG Advantage conference that the government’s challenge was to work with gas sector investors and developers to bring new projects to the development stage “as soon as possible”. How long it could take for InterOil to bring in a strategic partner to the Elk-Antelope field remains unknown. But there does seem to be a time limit in place. On August 1 Duma warned that InterOil had 180 days to honour the commitments of its 2009 LNG project agreement with the government with those since-shelved plans based on the Elk-Antelope field. Published in the October 2013 PNG Report magazine