IOC's Lynn on Total Schedule

[Putncalls]

I asked IR why Total would have a required timline for certification. He commented:

Some quick thoughts in answer to your question:

Why slow the project down if it is better than the PNG LNG project (both XOM and OSH have stated that PNG LNG is amongst the best globally). Total don't have many growth projects on their books at present. Surely they work against themselves if they cause delays.

The Operator needs to ensure that all the Govt obligations are met.

The PNG Govt has elections in 2017 and are expecting the JV to deliver an FID in 2017.

Under the Sales & Purchase agreement with Total, parties are not to add additional appraisal wells if it adversely affects the parties objective to reach FID in the shortest practicable timeframe.

[Putncalls]

I might procrastinate on that 2 billion payment if I was Total.

[admin]

Thanks for taking the trouble, put.

[jft310]

Good man Puts!!The SPA requires a start on certification after the appraisal wells are complete . Can't delay .

[Palm]

So yes, he mentions 2017 for FID, but Certification can happen most anytime in 2016 and still meet FID in 2017. Let's not get too excited about the things he states because:
1. It's not too hard to meet govt schedules which primarily target is project spending for licenses.
2. FID in 2017 can pretty easily be met with Certification coming even after 2Q2016.
3. Total and OSH have need to conserve cash outlays until markets give a little more indication on where things are headed.

[jft310]

Let's not forget the SPA requires payment at certification and further payments at FID. Partners are required to invest more money . One signs construction contracts at FID which is why many projects are stalled because they can't reach FID because their numbers do not work . Per all of our partners the Papua LNG numbers work at these low prices . That's why the plant gets built in a timely fashion. Super Majors and Asia countries look at long term needs. Never forget the gas production is limited to what's in the ground or more LNG projects are required to be built to replace projects that have run out of gas . Think Arun from 6 trains to zero because they produced all the gas .
Part of the government thingie is the Gas or LNG requirement for local electrical power generation . Or lots of moving parts .
Another is the government needs money to buy into the project .

[Getitrt2]

I might procrastinate on that 2 billion payment if I was Total.

However, you are not, and cannot know their internal dynamics and thinking.  I think they have higher priorities and processes they have planned, staffed, and budgeted for, including those payments.  I think part of what Lynn was trying to say is that those certifications are part of the process and are needed to proceed with and complete Basis of Design and FEED, and Total would not be undermining the process and the JV by improperly trying to "procrastinate" on their obligations. Also, jft is right about deadlines in the SPA for certification.

Thanks for the research and feedback.

[wapitidropiti]

I might procrastinate on that 2 billion payment if I was Total.

However, you are not, and cannot know their internal dynamics and thinking.  I think they have higher priorities and processes they have planned, staffed, and budgeted for, including those payments.  I think part of what Lynn was trying to say is that those certifications are part of the process and are needed to proceed with and complete Basis of Design and FEED, and Total would not be undermining the process and the JV by improperly trying to "procrastinate" on their obligations. Also, jft is right about deadlines in the SPA for certification.

Thanks for the research and feedback.

I am not so naive. The oil bidness is an "eat what you kill business". Remember Dec 13th -Total threw us under the Bus. They will do it again and buy the pieces at a discount. Same goes for XOM. Why help the competition? Anybody remember the history of Standard Oil? Their business strategy was "seek and destroy". I'm holding and waiting but only for IOC to prove up our assets-nobody is going to throw us a bone. We have to provide an alternative path which is to build our own LNG plant. Until then we are in their (SM) sights.

[Palm]

Exactly Wapi. People want to say "never forget" but that first communication from Total was 5.1 Ts or whatever. They have their shareholders to satisfy, not IOC's and we'll see what our mgmt and BOD are made of should an offer come from Total or another.

[jft310]

Total announced the P-1 number 5.3 T's I think but signed a contract to pay on P-2 numbers . We should have had a joint press conference which was planned but everyone jumped the gun.Oil Search first to nail us . Total totally ignored GLJ . Total created part of this uncertainty with their announcements .
I doubt if we do our own plant . Bet we build a plant with Total .Total is dragging now time wise part has to be the current price of oil . We are the minority partner .
Several of the new board members have an expertise in M &A . A defensive deal for Oil Search would be to merge with Interoil . That's possible . The government would like that I think. Twill be interesting .