OSH offfers 2 Scenarios for PRL15 gas

[Tree]

Ther, he did it, Searancke finally named TOT ans Shell.  I really like those competetive tensions.

Elk-Antelope talks crucial to PNG LNG train decision

By Russell Searancke

 19 November 2013 04:10 GMT

Oil Search said the outcome of the negotiations for InterOil's Elk-Antelope gas resources in Papua New Guinea is "of key importance" as a potential catalyst for a new liquefied natural gas train at the PNG LNG project.

In a briefing to analysts yesterday, the company said the P’nyang gas field is a key resource for a potential new LNG train, but P’nyang needs further appraisal as does the so-called "Hides upside" and other Highlands resources.

Oil Search offered two potential scenarios for the Elk-Antelope reserves in Block PRL 15, which InterOil is currently offering in a farm-out package to three supermajors - ExxonMobil, Shell and Total.

The first scenario is whereby gas from PRL 15 underpins a new train "through some form of integration into the PNG LNG project".

The second scenario is that PRL 15 resources "may be developed independently of PNG LNG as a separate project which may still utilise existing PNG LNG infrastructure".

InterOil said last week it is confident of closing a farm-out deal by the end of this year.

[sydbod]

Hi Tree,
Basically the same sort of information exists in the Investor Field Trip document.
http://www.oilsearch.com/Media/docs/1311...448d-0.pdf
Document Pg: 34
OSH View on Potential Development Scenarios
*************************************************
# PNG LNG expansion (Train 3) through development of P’nyang and/or Hides
upside and/or other Highland’s resources

# PRL 15 may offer opportunity for parallel development of further LNG train
through some form of integration into PNG LNG Project

# Alternatively, PRL 15 resources may be developed independently of PNG
LNG as separate project which may still utilise existing PNG LNG
infrastructure

So it does look like Elk-Antelope has a very high probability of being used at the PNGLNG site.
If I interpret what is written in that document correctly (???) it is looking like the PRL 15 gas may not be actually a direct part of the PNGLNG partners operation, but may be some sort of special agreement (process or adjacent construction) add on operation.

Do others get the impression that maybe IOC and XOM may be doing an independent partnership agreement for that gas and therefore the impression that IOC may get a slice of the first 2 trains at PNGLNG is not a probable event? Or am I just misreading the OSH document?

[Stavros]

Yes Syd ... I believe you are mis-reading the OSH document.

I think that IOC will get a percentage of PNG LNG in return for providing gas.
IF NOT, then IOC selects one of the other competing bids.

Since XOM has made it abundantly clear that they covet IOC's beautiful (g)as(s), the deal will be sweet indeed!

[jft310]

Citi took a stab at what Interoil might get in a deal with the PNGLNG partners and including the IPI partners (which are slowly being bought out) and that number is 11% of all 3 trains. If that is the case and with some assumptions then Interoil cash flow in a full 12 months of production would be over $500 million per year.Bring it on.

Fair to say also that the CEO of OSH does NOT have all of the current information . He is not on the Hession negotiating team. He just knows OSH needs the IOC NG .

[Tree]

[quote='.........So it does look like Elk-Antelope has a very high probability of being used at the PNGLNG site. If I interpret what is written in that document correctly (???) it is looking like the PRL 15 gas may not be actually a direct part of the PNGLNG partners operation, but may be some sort of special agreement (process or adjacent construction) add on operation. Do others get the impression that maybe IOC and XOM may be doing an independent partnership agreement for that gas and therefore the impression that IOC may get a slice of the first 2 trains at PNGLNG is not a probable event? Or am I just misreading the OSH document? [/quote]

Hey syd,

Your take is a possibility with this explanation.

Wood Mckenzie laid out XOM's options to integrate EA gas into PNG LNG Project:

*  XOM has a number of options to bring E/A gas into PNG LNG, these include:    1)  Revised unitisation agreement with XOM increasing it's interest in the project    2)  Existing unitisation extended to cover E/A, with the partners reimbursing XOM    3)  Tolling agreement, where XOM pays a fee to liquefy E/A gas through PNG LNG

To participate in expansion train #3, PNG LNG Project partners would be required to ante up a sizeable amount of capital.  Will they, can they?  It's possible that IOC/XOM alone do have an independent deal for expansion and will process the gas under a tolling agreement with existing PNG LNG project partners.  My view, this is remote as incentive is great for existing PNG LNG partners to participate in expansion.

Could be the following quote from OSH presentation is referring to a 'seprate project' which is IOC/XOM  agreement separate from the existing PNG LNG project agreement partners which will process gas at PNG LNG.  How else can E/A gas utilise existing PNG LNG infrastructure if PNG LNG partners are not involved in expansion?

# Alternatively, PRL 15 resources may be developed independently of PNG LNG as separate project which may still utilise existing PNG LNG infrastructure

*  XOM has a number of options to bring E/A gas into PNG LNG, these include:

   1)  Revised unitisation agreement with XOM increasing it's interest in the project

   2)  Existing unitisation extended to cover E/A, with the partners reimbursing XOM

   3)  Tolling agreement, where XOM pays a fee to liquefy E/A gas through PNG LNG

[Palm]

Thanks for that Tree. Likely OSH knows much more about this than they are allowed to say. It's very clear that XOM needs PRL 15 to be able to assure customers and PNG that expansion of PNG LNG to maximize IRR and provide the Treasury with needed funds and PNG with needed jobs. I posted the OSH presentation yesterday and in reading through it quickly it was clear that a lot hinges on the development of PRL 15. It's likely PRL 15 is used for train 3 at least; we'll know "any day".

I think it's pretty amazing that OSH is at least admitting that EA is the largest find ever in PNG.

[cybersssss]

Seems to me that as Hession put it last week...that these deals will be standard type LNG deals. Nothing out of the box. So that everyone bidding on the same thing. To me that means that ioc will get a percent of whatever project there gas underpins.

[Palm]

Agree Cyber. Sounds like deals are done as far as IOC XOM and the government are concerned. The clock is ticking loudly for the others to decide.

[jft310]

I think that OSH is telegraphing to its shareholders it must participate in this expansion and be prepared for an equity offering or additional debt that I guess is in the $2 Billion range or quite material.