11-16-2012, 03:10 PM
Good article by Blair Price
Blair Price
Friday, 16 November 2012
THE Papua New Guinea government’s cabinet has conditionally approved the “50/50 Gulf LNG” project, indicating that InterOil and the government may separately commercialise half each of the gas resources.
The InterOil-led project’s Elk and Antelope carbonate structures are technically part of the same field, but are separated by a fault.
But this may not be the only divide, as negotiations between InterOil and the government lead to a new development approach.
In a statement released yesterday, Prime Minister Peter O’Neill announced that the National Executive Council approved the “50/50” Gulf LNG project with the government to acquire an additional stake “over and above” its legal 22.5% entitlement.
The PM flagged what still needed to be agreed to, including “the terms in which the state will acquire the additional 27.5% equity in the gas fields”.
Such an acquisition, above the 22.5% managed by state nominee Petromin, will give the government a combined half stake in the Elk-Antelope assets. It is likely that some of this equity could be managed for the benefit of capital-lacking landowners.
O’Neill also raised the possibility of separate development paths.
“Cabinet also approved that the project may be commercialised equally and simultaneously on a 50/50 basis between the state and InterOil based on the available saleable gas, using two separate processing facilities,” O’Neill said.
The leader touched on other important issues surrounding the project since Petroleum and Energy Minister William Duma criticised it last year for straying from the original project agreement struck in late 2009.
O’Neill said cabinet had approved the “conditional withdrawal” of its notice of intent to terminate the 2009 project agreement. He said this was subject to the parties agreeing to certain conditions including “developing saleable gas on a 50/50 basis”.
On other terms that need to be agreed to, O’Neill said an internationally recognised LNG operator should operate the upstream facilities and the fiscal incentives of the 2009 agreement needed to be reviewed and amended accordingly.
This news means that the government still wants a big player to buy an operating stake of Gulf LNG and InterOil chief financial officer Collin Visaggio has previously confirmed that at least two supermajors have made bids so far.
With a lot still to be discussed and agreed to, a ministerial gas committee led by Duma has been formed, while a separate “bureaucratic negotiation team” with representation from the petroleum, treasury and justice departments along with Petromin was also established.
The bureaucratic team is expected to negotiate the 50/50 proposal and report back to the ministerial committee by the end of this month.
O’Neill said these teams were formed to “fast-track the commercialisation of the country’s second LNG project”.
In what is clearly agreed to by InterOil and the government, cabinet endorsed that InterOil could locate its LNG plant in Gulf province instead of near Port Moresby under the 2009 agreement.
Overall, the 50/50 plans differ markedly from the 2009 agreement, which was based on one LNG plant of 7.6 million tonnes per annum capacity.
While the exact capacities of two LNG plants for the resources are not yet revealed, Visaggio has previously said development can start with a minimum of 3.8Mtpa – which indicates that separate plants targeting roughly 4Mtpa each could be part of the finalised Gulf LNG project agreement.
First LNG timelines – plus whether conventional, modular and even floating LNG development will take place – are all subject to the ongoing negotiations, which includes the input from the party or parties that might acquire an operating stake of Gulf LNG.
While how the government might finance buying an additional 27.5% stake of Gulf LNG is not yet clear, O’Neill recently spoke of spending more than 3 billion kina on infrastructure plans next year so the workforce departing the PNG LNG project construction phase was not left idle.
This infrastructure program is targeting roads, ports, health, education, and law and order facilities.