http://www.upstreamonline.com/hardcopy/news/article1331909.ece
The following article was published at the end of last week by Russell Searancke, the plugged in energy reporter for Upstreamonline. I’ve underlined the important new insights, which make it clear that Exxon is working diligently to close the deal with InterOil, that the PNG government has been kept informed of the deal structure, that PM O’Neill is supportive of the deal, that there are no reasonable grounds for opposition by Duma given the economic advantages of this deal to PNG, that the valuable optionality of additional LNG capacity will be held by InterOil rather than Exxon, and that the deal seeks to facilitate early development of Elk/Antelope.
ExxonMobil and Interoil seeking agreement for PNG LNG expansion
By Russell Searancke Wellington
12 July 2013 00:00 GMT
ExxonMobil is working hard to finalise an agreement with Canadian explorer InterOil over a gas supply arrangement for an expansion of the US supermajor’s Papua New Guinea liquefied natural gas project.
The Canadian company revealed in late May that it was in exclusive talks with the US supermajor over an equity stake in InterOil’s Elk-Antelope gas discoveries in Block PRL-15.
InterOil subsequently indicated that major commercial and technical terms have been agreed, and the focus is on “finalising a binding agreement”.
Its most recent guidance was that the proposed deal will see ExxonMobil buy an interest in PRL-15 that gives it access to 4.6 trillion cubic feet of gas in order to build an additional LNG train.
An ExxonMobil spokeswoman confirmed that discussions are ongoing, but would not put a timeline on talks.
If a deal is agreed, it will need to be sanctioned by the Papua New Guinea government, which, according to InterOil has been kept well informed about the ExxonMobil tie-up.
Prime Minister Peter O’Neill reportedly told local media that he welcomed the potential deal between ExxonMobil and InterOil.
However, Petroleum & Energy Minister William Duma reportedly voiced concern about one major energy company — ExxonMobil — dominating the country’s petroleum industry.
Duma had lobbied for the involvement of Shell when the government first insisted that InterOil find a major partner to operate a LNG project based on feedstock from Elk-Antelope.
The deal being negotiated with ExxonMobil is not what InterOil and Duma had originally foreseen, but market pundits have acknowledged the economic advantages for all parties involved of a tie-up with PNG LNG rather than a new standalone project.
InterOil’s original plan was to introduce a large company to operate the Gulf LNG project, which already had provisional government approvals.
The Elk-Antelope fields are understood to contain best case contingent resources of 9.45 trillion cubic feet of wet gas.
Assuming the ExxonMobil deal is completed, InterOil will still have the option of either developing its own LNG project using the remaining gas from PRL-15 plus other discoveries — including the recent Triceratops find — or it could pursue further co-operation with ExxonMobil.
InterOil said PNG would benefit from its tie-up with ExxonMobil “in a number of ways” including the use of PNG LNG infrastructure to create strong synergies and cost savings, and allowing for early development of the Elk-Antelope fields.
“InterOil believes that the economic benefits to the existing project partners and the country of Papua New Guinea are compelling,” the company said.
ExxonMobil is already progressing with plans to develop its own P’nyang gas field as a supply source for a third train at PNG LNG, so it is understood that any agreement for Elk-Antelope gas would be the stimulus for a fourth train.
rogress on LNG expansion plans, underpinned by P’nyang resource, augmented by other Highlands drilling.