Total to push Gulf gas projects

[Getitrt2]

Palm, I disagree and stand by everything I said, which is also backed up by what both I and JFT have heard directly from IOC. The 50% option, which was also tied to a 3.8 mmtpa LNG plant, may still technically be "out there", although I am uncertain what kind of formal NEC approval it got; but I feel certain it is irrelevant at this point. PNG can get all the domestic use gas it might need from a fraction of its 22.5%, without trying to buy more at commercial prices, and there would be no reason for them to disrupt the Total agreement now. The Total deal which PNG is "totally" in support of removes any potential use of any part of an additional 27.5% as an "anvil over IOC's head". I consider that unjustified and useless speculation now.

[Palm]

I've heard the same things from management recently Getit, and I stated that if things go as all expect the government will get their 22.5%. But the point is the government is in control of the Gas Agreement and the last terms from NEC were "up to 50%". I seem to remember all of us saying there was no way that could be, and management saying certian things back in the fall of 2012, and you saying some of the same "no ways", but then came the official attached document and nothing has officially changed since then. We all know how politicians are and how things can quickly change when zebras and such enter an arena. Chances of it happening are probably fairly low, but for you to say there is zero chance when it is still officially in place is as "unjustified" as what you say even considering it at all is.

[jft310]

Today I was told the govt used the 50% to throw cold water on an Exxon deal. Today we have a Total deal. The govt loves Total and the 50% is off the table.Yes the govt carries a big stick

[Palm]

Ahhh that's right. And when did the Total deal close? I know, absolutely nothing has ever gone wrong or will again.

[jft310]

I assume the stick is still on the table sure. Interoil needs to do things the way the govt wants we can conclude or else.

[Getitrt2]

I did not say "zero", but I'll say now it's about as close to zero as anything could get. That was something approved in 2012 in a totally different situation that "may be negotiated" and was not. I did not say "no way" up front, but probably did at some point, and it was right; it did not happen and has even much less chance now. I have no doubt that it's dead. The government supports a deal with Total and would not revive that crap now and screw it up. I cannot imagine why anyone would even be bringing it up now other than with motives to create unjustified uncertainty like some short. There is a lot else to be said refuting any such likelihood, but I don't even consider it worth my time; and I would appreciate not hearing any more about it from any IOC shareholder.

The motivations and goals and interests of IOC and the government are in sync now, not at odds.

[Palm]

Duma just mentioned the 2009 Project Agreement. That must be off of the table also since it's older than this 2012 NEC pronouncement signed by O'Neill. Just like the Notice Of Intent To Cancel was in place until this 50/50 Agreement conditionally suspended it, the up to 50% agreement is on the NEC books until the Gas Agreement is signed. That's a fact. And if this Agreement is not in effect, then the Gulf location is not officially approved.

[Relker]

So, in other words if this Gas Agreement is in accordance with the 2009 Project Agreement, there will not be a 50/50 Agreement. Nevertheless, I can imagine this scenario is still feared and Total wants it from the table. This might be the reason that in the roadshow:
1. PM was mentioned as location for the LNG-plant as Palm suggested
2. The entrance barrier for a stake was highered by:
- a license payment before the start of the project
- a 40/60 financing of the JVOA although most LNG-projects have more leverage
3. The mentioning of a strategic Japanese partner in order to secure a low interest loan.

[Palm]

Lots of things in motion with this. There will be a new Gas Agreement that comes out of this. That will hold all of the requirements, location(s) allowed, govt participation, etc. Even before the up to 50% was approved by NEC the government was talking about wanting in-kind gas on most/all future projects. They blew it on PNG LNG but with all of their plans now in ace they have a high priority of providing electricity to the masses. Whether that comes with NG as a source, or whether it's hydro, solar, wind or geo, it's going to happen. Gulf has opportunities for most/all of these so with CSPs galore it won't be surprising if they want SOME allowance out of all the gas that appears to be present there whether it comes from PRL 15, PRL 39 or what.

Then we have the NEC approval this week of the 30MW EWI plant for PM. Clearly stated was that it and other plants will have the capability to burn natty.

IOC has been talking about being the first company to supply in-kind gas, so it's on the table. It's been mentioned before that PNG only needs small volumes for domestic use so the question is how much might they take out of the combined 22.5% as opposed to taking (and paying commercial rates for) a percent or two above that which for PRL 15 could come out of the 19.3% very easily.

We only really know a small amount of what's being discussed. Let's let it happen.

[Getitrt2]

Why would the government pay a much higher price and incur more capex obligations to get some gas for power when they can get plenty from the 22.5%?

Some "facts" are very meaningful; others don't mean much at all.

There will be a completely new Gas Agreement to fit the current situation and plans with Total, which will replace all previous agreements, and the plant may very well be built near PM and PNG LNG. We will see.