Short Myth: IOC has no SM bidders
Myth Busted-
Phil Mulacek - CEO
..."We have had solid expressions of interest from bidders, including IOCs, NOCs, and Asian utilities for a foundation project of 3.8 million tons."...
NOCs = National Oil Co's, think a PTTEP, JAPEX type
Asian Utilities = Think a KOGAS/Tokyo Gas type
IOCs = International Oil Cos = Multi-National Oil CO's = Majors = Super Majors
Super Majors are the 7 largest IOC's, "the term “Big Five” refers to the ExxonMobil, BP, Chevron, Royal Dutch Shell and ConocoPhillips. Together with Total and ENI, these companies are commonly referred to as the “supermajors.” The SM's are the largest IOC's and account for ~73% of worldwide profits and reserves.
All of the SM's have been reported as in talks with IOC for a stake in Gulf LNG or NapNap.
Pavel Molchanov - Raymond James
And then question for Colin, if I may. You were quoted in PNG Industry News several weeks ago as saying that at least two supermajors have placed bids on the project. Can you confirm that quote? And can you elaborate on what you were conveying there?
Colin Visaggio - CFO
Clearly it’s a quote by myself, which I can confirm. And as Phil has stated, we have national oil companies, we have majors, and we have utilities who are involved in the process. So very happy to say that I have made that quote, based on very clear details and information that we have, unlike other sources, which are often quoted, which people will not put their name to. I think when someone does not put their name to a quote or a statement, I think you cannot attribute much to that statement or quote.
Short Myth: Resource is suspect in the industry = non accretive bids and deal will suck
Myth busted-
Evan Calio - Morgan Stanley
Maybe one last question and I’ll leave it for others. A different topic. I know you can’t publish really a reference to the Gaffney, Cline report as you’re only legally permitted to have one resource report. Yet there have been assertions made that the estimate is lower than the GLG estimate. Can you give us any comment on whether the C1-C3 results differ materially from your GLG?
Phil Mulacek - CEO
One is a certified, so [GLJ], number one in Canada. They handle a lot of public companies. And that is a certified number of 8.59. And then GC did a quick review, and they were on 2C of 6.5. So both confirmed that we had more than enough to do 8 million tons of capacity. And you’re not going to stop there. Look at it in simplicity. It’s similar to Exxon. They only had one well in Angora. They only had a couple of wells in [Juha]. Yet they’re building a $19 billion project, without full definition on shifting resources and 3P-2P, to get LNG. We’re the same. And 3 will help at that. (More wells = more gas = more phased LNG capacity)
Short Myth: IOC is required to have a Super Major Operator
Myth busted-
Sal Ilacqua - Monness Crespi Hardt
Now, the government specified they want a certain type of bidders, mainly big, supermajors. And where do we stand on that? Are all parties still eligible? Are you talking to both?
Phil Mulacek - CEO
Yes, all parties are still eligible. We’re working with the government. The original agreements just bring in some proven capacity, whether that’s contract. And we’ve always said that we bring those capacities in. And we’re in active engagement with parties that qualify.
Phil needs to be translated here.
2009 PA is the original agreement and only required the 7.8 to 10.6 Mtpa project to be delivered. IOC will deliver those capacities.
2009 PA allowed for contract LNG operator. 'Contract' refers to contract operator, which BTW, contract operators are commonly chosen to operate LNG facilities for the SMs too.
From PR Dec. 2009 announcing the 2009 PA:
..."As previously announced, the proposed LNG project would be developed by InterOil and its joint venture partners Pacific LNG Operations Ltd. and Petromin PNG Holdings Limited. The project targets a $5 to $7 billion LNG facility, with multiple trains. Additionally, the Agreement provides for the expansion of the plant up to 10.6 million tons per annum (mmtpa)."...
PA allows phased construction, multiple trains, and limits max production. Bet you a buck that 10.6 Mtpa limit has been amended higher.
No mention of required SM Operator
Earlier Short Myths Busted -
Myth: IOC can't have found gas/condensates. The Majors looked there and found nothing!
**IOC commissioned new state of art basin modelling revealing a more accurate survey.
Myth: IOC by not having an EWT is admitting E/A isn't as represented.
**EWT as described by shorts is not required by SEC or PNG DPE and is only one of many 'subsequent works' options contractually available to IOC to use at their discretion to quantify a petroleum pool which IOC.
In the mean time IOC's Bod is scrutinizing development options, or has chosen winner, of up to 6 bidding entities all pre-qualified by PNG Gov't and all have shown abiiity to finance. Start up proposals range from 3.8 Mtpa, 4.2 Mtpa up to 4.9 Mtpa.
Won't it be grand when they decide to inform us of their decision?