Wood MacKenzie on IOC/XOM

[jft310]

Will- these dates make no sense , I think we wait till Monday or Sunday night bar reports for more info, For sure IOC has two rigs that can drill more holes in the PRL 15. I like you would like to know more.

[Tree]

Also from Wood Mackenzie on IOC/XOM:

* We would expect it (XOM) to focus marketing efforts on an operated expansion position in PNG, rather than the higher-cost and more technically challenging projects in Australia. This would make PNG LNG one of the biggest and most profitable LNG projects in the region and generate significant additional value to both the PNG LNG partners and the government.

* PNG LNG will increase PNG GDP by 20% - before expansion.

* The opportunity to build on it's gas export business is vital to the longer term outlook of the PNG economy.

* 3rd train expansion saves downstream capital expenditures of 15%, 4th train 20%. (The upstream savings of a negative gas cost, -$/Mcf, opposed to ~$3/Mcf PNG LNG feed aren't even mentioned)

* Curent JCC prices equated to LNG sales prices of US $15.7/Mcf.

[jft310]

Heres some fun facts for ya.
IOC owns its NG at 5 cents per mcf
Mr Market prices IOC's mcf at 60 cents today
NG exciting the PNGLNG plant will sell for $15.75 per mcf.
So what happens to the IOC stock price if we deduct $3 per mcf to process the NG and IOC gets slice of every mcf sold at that higher price. Anyone who thinks IOC will not get a chunk of LNG revenue from PNGLNG needs to come buy this beautiful bridge I have.

[Tree]

Clarification from Rexstar.com in the Wood Mackenzie June write-up:

"ExxonMobil would need to agree terms with it's partners to bring the gas into PNG LNG project.  This would require it's partners to acquire equity in PRL 15 and agree to a revised project unitisation agreement or accept a tolling fee for Elk/Antelope gas to be processed through PNG LNG.

These options would allow all partners to benefit from expanding the existing project.  However, the level of reward available may depend on each partner's abiity to committ to the sizeable investment required to expand the project."

Could well be the time involved in defining the deal involves herding the Gov't and project partners to declare their expansion involvement.  XOM doesn't need project partners approval or involvement to move on a 3rd train with E/A gas.

[Getitrt2]

If the latter is true, which I believe it is, why would the former apply?

[Tree]

If the latter is true, which I believe it is, why would the former apply?

XOM as operator is seeking IOC gas for that expansion of behalf of project partners which have the right to cough up $ and join in expansion or minimally accept a tolling fee.  Same would hold true for P'nyang gas as it is not in PNG project agreement and we see that XOM currently does not seek that gas for the project.   Partners have no veto power they accept a larger role in project or not.

[jft310]

Since Oil Search provided the NG last time odds are they get a smaller slice this time around. Or who gets whacked to make way for IOC and its maybe new 20% interest. The number change to get IOC in the mix.