Weekend Cogitation on Exxon Deal

[smeltman]

  Smeltman_ Have read many of his writings. Sharp guy ....also a Dr. Walker (can't remember his first name- he used to sometimes sub for Rush) . I believe he at one time taught at George Mason or at Georgetown .Have you discovered the new (for me) guy,Dr. Benjamin Carson ? He was the author of "Gifted Hands" I think. What a miraculous story. He was the one who spoke at the president's breakfast meeting a few weeks ago. GLTY.

Sageo, I believe you are referring to Dr. Walter E. Williams. I've read his columns for more than a decade. Another good 'common sense' economist. He and Dr. Sowell both have interesting biographies. I would find it fascinating if they ever had the chance to take the eventual deal that is coming, and examine it in the context of state sponsorship and encouragement of private investment. (And I know they would have a field day with the shenanigans and the like over the past few years IOC has had to endure.)

[sageo]

  Smeltman_ Have read many of his writings. Sharp guy ....also a Dr. Walker (can't remember his first name- he used to sometimes sub for Rush) . I believe he at one time taught at George Mason or at Georgetown .Have you discovered the new (for me) guy,Dr. Benjamin Carson ? He was the author of "Gifted Hands" I think. What a miraculous story. He was the one who spoke at the president's breakfast meeting a few weeks ago. GLTY.

Sageo, I believe you are referring to Dr. Walter E. Williams. I've read his columns for more than a decade. Another good 'common sense' economist. He and Dr. Sowell both have interesting biographies. I would find it fascinating if they ever had the chance to take the eventual deal that is coming, and examine it in the context of state sponsorship and encouragement of private investment. (And I know they would have a field day with the shenanigans and the like over the past few years IOC has had to endure.)

Thanks,man. Boy is my brain shot,or what? You are 100 % correct ! Dr. Walter Williams ....my wfe and I used to laugh out loud when he talked about his "Mrs. Williams" ! He must have loved her very much.What a smart and delightful guy. Miss his great commentary.

[Palm]

I really believe that XOM is shooting for 2 additional trains and O'Neill's comments allude to that also. And people may want to revisit Resourcearb's article from then end of April where he predicted almost exactly what we are seeing. Interesting to read some of the comments at the end. Best is some of bonk's. He does his best to try and state that XOM interest in EA/PRL15 for PNG LNG expansion is not realistic. Resourcearb proves to be quite accurate:

http://seekingalpha.com/article/1385261-...roil-s-gas

[Petro2458]

I hope you are right. I believe max value (from a market perspective) will be if XOM takes operatorship and we FID 2 trains. I really like resourcearb's article... It's outstanding.

In fact, and I could be wrong, but all this 1 train talk since NEC approved 1 train is why we aren't north of $100...and if XOM deal is for only 1 train then we have a situation where the recoverable gas estimates aren't sufficient to support 2 trains. I have been in a lot of data rooms... And seeing the data doesn't resolve the fact that uncertainty exists ... I have been hoping that the low case was sufficient to FID 2 trains now.

[Palm]

Petro,
I'm basing this on a couple of things:
1. O'Neill's comments after being informed of the discussions and stating that one and likely 2 trains will come in the initial deal to be struck.
2. The desire by XOM to develop as much LNG output as possible based on their recent comments and presentations. They have seen the data and likely feel there is a very good chance that GLJ's numbers are good and maybe conservative. However, OSH has assured them more than once that they could prove up enough gas. That hasn't happened. XOM needs to assure investors, banks and buyers that IOC can provide the gas.
3. Resourcearb's excellent analysis which has not been successfully challenged. He stated that there is the ability to support up to 8 trains at the PNG LNG site and the current project can support up to 5. They have 2 trains fed now; that leaves room for 3. I think IOC is confident they have enough gas for 3+ trains. Resourcearb states the current subsea can accommodate 3 trains-worth of gas; again this has not been disputed.
6. The government is highly supportive of XOM being the partner and I believe upstream operator for PRL 15. I think XOM will end up as IOC's upstream operator/partner as it makes great sense for both XOM and IOC.
7. Given the belief that XOM will be upstream operator I believe there is still a chance that JKM could be involved beyond the 1 or 2 initial trains XOM commits to. The 2nd train will require an additional pipeline which would likely be sized for at least 3 trains. The costs of all of that will likely be compared to doing a project at the Gulf location. JKM could get involved there and XOM would be an obvious required upstream operator. Japan and Korea would likely commit to buy any LNG from either scenario.

All of this I believe is being looked at/considered/negotiated right now. If XOM wants to lock up the resources for all of their needs, they will have to pay, but they also bring the ability to front a lot of the development costs and/or financing as well as offtake agreements. It's Exxon's at this point and O'Neill and IOC management like what they hear.

This will be big.