All the talk on the PA and License expiration possibility is nonsense. Some are 'requiring' IOC to address this in a PR or in the CC. That is an ignorant stance to take and I hope IOC does not start now to entertain ignorant request from needy shareholders. Sorry if this offends you but blunt talk is required.
The facts are as follow:
PA's and license agreements have fixed and flexible guidelines obligating both developer and host to certain contractual performance requirements.
Project Agreements outline flexible/fixed guidelines contractually between host nation and project developer. The critical fixed elements of a PA are the fiscal and commercialisation terms over a 20-30 yr. period which PROTECT the developer and the host nation as well as certain good faith efforts to perform within the PA/licensing framework.
Multi billion dollar LNG projects take an average of over 5 yrs. to engineer, sell and go to FID, after the time enough resource is proven. The project is not real to the market until the resource is proven and IOC's project became market real with the GLJ report pring 2010. LNG is a well to burner tip business and is dictated by finding buyers for the LNG, partners and financing for the plant. Market realities over a multi-year project development change and so does the nature of the project to better fit the market. Developer and host work together in good faith to adapt. IOC and PNG have been working together in good faith and will continue to do so as long as each meet their obligations. There is no FID deadline date which can trigger a PA expiration in IOC's project. If IOC was not in the midst of selling stakes and pre-construction investment then the Gov't would be justified in cancelling the project.
The same spirit holds true for exploration license obligations. Unknowns always lie in the future and as IOC has made the progress toward meeting the outlined goals for exploration the Gov't has, and will continue to be, compliant with requests for extensions. Last fall we received an extension as IOC was progressing in good faith toward Ant-3 and future drilling plans.
Regarding approvals, PDLs and the like, they are earned by developer, not granted by a whimsical Gov't. As the required steps are met by developer that alone triggers the approval or PDL. PNG will not welch on their obligations tio IOC or any other developer as that developer performs as they were obligated.
"The Agreement sets fiscal terms for a twenty year period, which include a 30% company tax rate and certain exemptions applicable to large scale projects of this nature. It also provides for a 20.5% ownership stake to be held by the Government of Papua New Guinea’s nominee, Petromin PNG Holdings Limited. A further 2% ownership stake will be taken by landowners directly affected by the plant.'
"The agreement calls for the delivery of a 7.6 million-10.2 million mt/year LNG project based on InterOil's Elk and Antelope gas reserves, using internationally recognized technology and operators with experience at similar-sized assets."
"The project targets a $7.0 billion two-train LNG facility, with each train capable of producing approximately 4 million tons of LNG per annum. While current plans call for first production of LNG towards the end of 2014 or beginning of 2015, InterOil is progressing a proposed liquids stripping plant, to be located in Gulf Province, in late 2011/early 2012, which would provide an attractive revenue stream to Papua New Guinea before the LNG project is expected to be completed.
The approved project agreement, which is expected to be signed before the end of the year, establishes the terms for commercializing and monetising the Elk/Antelope natural gas resources. InterOil expects that natural gas produced will be treated at a conditioning plant in the Gulf Province and then transported to the proposed LNG plant site near the Company’s existing refinery at Napa Napa. InterOil anticipates that the LNG plant will be designed to operate as a tolling facility, and that the LNG will be jointly marketed by the upstream owners on behalf of the joint venture."
"The project agreement stipulates that a final investment decision should be reached on the LNG facility by June 2013."
Duma tried to circumvent IOC's PA rights last June 1st with his '180 day trigger notice to cancel IOC's PA'. How'd that work out for Duma?
"The minister's statement follows a May 21 letter written by Liquid Niugini Gas Director Christian Vinson to Department of Petroleum and Energy Secretary Rendle Rimua, which claims the government's notice of intent to terminate the project agreement is invalid. Vinson said that to terminate the agreement, the state must establish that the company has failed to take certain steps, rather than expressing an opinion as to its intentions not to do something. (BINGO Christian)
He said the company's obligations under the project agreement did not commence in full force until the satisfaction of all the conditions precedent. Vinson added that Liquid Niugini Gas had been using its reasonable endeavors to pursue satisfaction of those conditions and was proceeding in good faith to find an "LNG operator" pursuant to the project agreement.
Liquid Niugini Gas "invited" the department to withdraw its termination notice in writing by the close of business on June 1, or it might take legal action against the state. InterOil executives did not respond to Platts' inquiries Friday.
BTW, the IBs/IOC are up to their ears in negotiations if you hadn't noticed. Let's not bug them with our needy requests.
