'Putncalls' pid='43790' datel Wrote:Building a pipeline between IOC and XOM is a small effort relative to a new LNG plant. IOC would not have to wait until E/A gas becomes XOM LNG before they get paid. Buying IOC NG may be cheap compared to the cost of drilling. Two bidders for the NG is better than one. XOM is no longer an E/P company.
It's also a small effort relative to expansion of an LNG plant, although $1 billion is still a lot of money. In any case, both generally produce great returns, and IOC expects better returns from an LNG plant with Total, regardless of any pipeline or other capex costs. The available agreement terms are much more important than the relative plant costs.
Not have to wait? You don't know what terms would be on a sale of gas to XOM, and IOC is getting paid a hell of a lot by Total before any plant is built or LNG produced.
Buying IOC gas would NOT be cheap compared to the cost of drilling, even at P'nyang, given the agreement with Total and what they are paying for IOC gas. OSH and XOM have been drilling at P'nyang and are serious about drilling more, and obviously think that is cheap relative to the returns from PNG LNG expansion.
IOC has already had two bidders for the NG, and Total won.
XOM is no longer an E/P company? Really? Maybe not entirely, but certainly in large part. Keep in mind the "P" stands for Production. XOM is doing a hell of a lot of Exploration and Production around the world, along with transportation and retailing.