07-19-2016, 08:54 PM
TOTAL WILD CARD
The big question for both ExxonMobil and Oil Search is what will Total do.
The French company owns a 40.1 percent stake in Elk-Antelope and is the operator, with InterOil the next biggest holder at 36.5 percent.
Total has outlined plans to build its own LNG project in Papua New Guinea, something that may prove impossible if ExxonMobil and Oil Search believe their interests lie with expanding the existing facility.
It's worth bearing in mind that even with Papua New Guinea's superior cost structure, a new LNG plant would struggle to be viable in the current environment of low prices.
It's possible that all parties could end up working together, but it may be more practical to find a way to buy out Total's position in Elk-Antelope.
The attitude of the PNG government will also be important, as it will have to be convinced that a brownfield expansion of the existing LNG plant is a better long-term bet than trying to build a second, greenfield operation.
As can be seen, there are many loose ends still to tie up, but ExxonMobil appears to be making a strong bid for quality assets with its eyes firmly on the long term.
If it all works out, this could be a great example of a resource company doing what commentators always say they should be doing, namely buying good assets at the bottom of the market and seeking ways to exploit them in a cost-effective manner.
Resource companies have correctly copped criticism when they do expensive acquisitions at the top of the commodity cycle, so they deserve kudos when they buy when the market looks bleak.
The big question for both ExxonMobil and Oil Search is what will Total do.
The French company owns a 40.1 percent stake in Elk-Antelope and is the operator, with InterOil the next biggest holder at 36.5 percent.
Total has outlined plans to build its own LNG project in Papua New Guinea, something that may prove impossible if ExxonMobil and Oil Search believe their interests lie with expanding the existing facility.
It's worth bearing in mind that even with Papua New Guinea's superior cost structure, a new LNG plant would struggle to be viable in the current environment of low prices.
It's possible that all parties could end up working together, but it may be more practical to find a way to buy out Total's position in Elk-Antelope.
The attitude of the PNG government will also be important, as it will have to be convinced that a brownfield expansion of the existing LNG plant is a better long-term bet than trying to build a second, greenfield operation.
As can be seen, there are many loose ends still to tie up, but ExxonMobil appears to be making a strong bid for quality assets with its eyes firmly on the long term.
If it all works out, this could be a great example of a resource company doing what commentators always say they should be doing, namely buying good assets at the bottom of the market and seeking ways to exploit them in a cost-effective manner.
Resource companies have correctly copped criticism when they do expensive acquisitions at the top of the commodity cycle, so they deserve kudos when they buy when the market looks bleak.
