How'd that 'additional drilling' turn out?

[Tree]

Report says Papua New Guinea LNG expansion ‘a virtual certainty’

Latest Oil and Gas News: September 10, 2012 

Compiled By: Larry Persily (Platts; Sept. 6) - Competition from lower-cost LNG in North America and East Africa will favor the expansion of existing LNG projects in and around Australia over costly new developments, Bernstein Research analysts said Sept. 6. 

"Costs and competition will favor brownfield LNG expansions over greenfield projects going forward," the analysts said. Oil Search is the most likely Australian LNG producer to expand its initial project, located in neighboring Papua New Guinea, the analysts said. 

Partner ExxonMobil started drilling operations late July at the Hides gas field onshore. In addition to Exxon (33.2 percent) and Oil Search (29 percent), the other partners are the National Petroleum Company of Papua New Guinea, Australia's Santos, Japan's JX Nippon Oil & Gas Exploration and PNG landowner group Mineral Resources Development Co. 

The $15.7 billion project is two years into a four-year construction schedule and is on track to start up in 2014. The liquefaction facilities will comprise two production trains with total capacity averaging almost 900 million cubic feet of gas per day. Additional drilling "makes PNG LNG Train 3 a virtual certainty," the analysts said, adding that they expect front-end engineering design studies on Train 3 to commence next year, with a final investment decision by early 2014. Additional expansions could follow, they said.

[jft310]

Since Sept 2012 OIl Search has proved they can't find enough NG for this third train, at least so far, so Exxon had no choice but to strike a deal with IOC for part of their NG to allow for this third train construction to proceed.

[Tree]

Since Sept 2012 OIl Search has proved they can't find enough NG for this third train, at least so far, so Exxon had no choice but to strike a deal with IOC for part of their NG to allow for this third train construction to proceed.

Oil Search upbeat on PNG LNG expansion

PUBLISHED: 23 JUL 2013 09:34:00 | UPDATED: 24 JUL 2013 08:47:25

Updated | Oil Search has given an upbeat assessment of prospects for participating in an expansion of the $US19 billion ($20.5 billion) Papua New Guinea liquefied natural gas project, even if gas for the additional capacity is brought in from another company.

[Tree]

Friday, June 7, 2013 Exxon’s PNG Gas Grab Welcome for Aussie Partners Exxon Mobil Corp.'s move to snap up more natural gas assets in Papua New Guinea has sparked concern the U.S. oil major is about to leave its Australian partners there behind. But Oil Search Ltd. and Santos Ltd. needn’t be worried, according to Macquarie’s Adrian Wood, who says they will benefit from an expansion of Exxon’s $19 billion PNG LNG gas-export project regardless of whose gas is fed through it. Oil Search and Santos own 29.0% and 13.5% of PNG LNG, respectively, compared to Exxon’s operating interest of 33.2%. The foundation stage of the project is due to start producing liquefied natural gas, or LNG, for shipment to Asian customers next year. Exxon and partners have already found natural gas to support an expansion of the project to three LNG production units, also known as trains, from the two currently under construction. However, Exxon is poised to strengthen its hand. Last month, it announced it’s in exclusive talks with Houston-based InterOil to invest in the latter’s gas assets in Papua New Guinea. Boosting its own resources would give Exxon more power to determine when a third train is built and whose natural gas will be processed for export. That may feed concerns Oil Search and Santos will be left out of a future expansion. Oil Search, in particular, has a lot to lose as it owns 38.5% of the recent P’nyang discovery that could also support a bigger PNG LNG. Oil Search estimates that P’nyang has about 2.5 trillion to 3.0 trillion cubic feet of gas, a little more than half the 4.0 trillion to 5.0 trillion cubic feet that Exxon estimates will be needed to support a third train. InterOil’s assets, meanwhile, are thought to hold around 4.0 trillion to 5.0 trillion trillion cubic feet. Mr. Wood says he understands that all partners in PNG LNG will need to approve the use of InterOil’s resources at the facility. “As a result, any deal proposed by Exxon to incorporate this gas into the joint venture will need to be made sufficiently attractive for both Oil Search and Santos, who collectively own over 42% of the project, to sign up,” Mr. Wood says. Even a scenario where Exxon forces all of the InterOil gas into PNG LNG would be beneficial, because Oil Search and Santos would nevertheless maintain an exposure, albeit diluted, to new trains offering higher returns. They would also be entitled to compensation from Exxon for a lower equity stake in the first two trains. Alternatively, Exxon could sell stakes in InterOil’s resources to Oil Search and Santos, allowing the venture to preserve its current equity share in an enlarged project. That would require Oil Search and Santos to pay for the extra gas. In Oil Search’s case, Mr. Wood says that could mean a US$1.3 billion price tag to acquire a stake in InterOil’s assets. This would result in a US$1.1 billion funding gap for Oil Search if the payment falls due in the second half of next year. However, if the payment can be deferred by about a year, cash flowing from the foundation stage of PNG LNG should be enough to cover most of the bill. “It is difficult to envisage a materially negative outcome for current joint venturers,” Mr. Wood says. He rates Oil Search at Outperform.

[Tree]

Alternatively, Exxon could sell stakes in InterOil’s resources to Oil Search and Santos, allowing the venture to preserve its current equity share in an enlarged project. That would require Oil Search and Santos to pay for the extra gas. In Oil Search’s case, Mr. Wood says that could mean a US$1.3 billion price tag to acquire a stake in InterOil’s assets.

Mr. Wood is assigning a $4.48 Billion value to a 4.6T sale.

Alternatively, Exxon could sell stakes in InterOil’s resources to Oil Search and Santos, allowing the venture to preserve its current equity share in an enlarged project. That would require Oil Search and Santos to pay for the extra gas. In Oil Search’s case, Mr. Wood says that could mean a US$1.3 billion price tag to acquire a stake in InterOil’s assets. 

[Palm]

Conservative but not bad. Once deal closes and they start drilling again with more rigs (XOM likely will bring in a rig or three) that will drop the % that the 4.6Ts represents. Only goes up from here!

[Tree]

Conservative but not bad. Once deal closes and they start drilling again with more rigs (XOM likely will bring in a rig or three) that will drop the % that the 4.6Ts represents. Only goes up from here!

The PNG LNG expansion feedstock metamorphosis is amazing.  In a year and half it's gone from poking $100,000,000 wells in Hides to flirting with P'nyang (not in the PNG LNG gas agreements) to OSH needing to cough up $1/3 Billion for a share of IOC's gas to OSH needing to calm the markets thet they will likely have a chance at joining PNG LNG expansion.

Why is it taking sooooo loooong??

Hession is happy.

[ArtM72]

Macquarie’s Adrian Wood has a differing view of the facts on the ground as we see them.

"Exxon and partners have already found natural gas to support an expansion of the project to three LNG production units" Not from what we've seen so far.

"all partners in PNG LNG will need to approve the use of InterOil’s resources at the facility...any deal proposed by Exxon to incorporate this gas into the joint venture will need to be made sufficiently attractive for both Oil Search and Santos, who collectively own over 42% of the project, to sign up.” This argument, while hotly debated, doesn't seem to be getting much traction.

"InterOil’s assets, meanwhile, are thought to hold around 4.0 trillion to 5.0 trillion trillion cubic feet." Really? By whom? OK they do hold 4.0 to 5.0 TCF They also hold considerably more.

"In Oil Search’s case, Mr. Wood says that could mean a US$1.3 billion price tag" Let's see 29% of 4.6 TCF = 1.3 TCF, or $1/mcf. As Ronald Reagan famously stated, "There they go again".

Hard to take much of what Adrian Wood has to say as authoritative. At best, a good conclusion based upon erronius statements.

[cybersssss]

Does anyone have an idea as to how long it would take to drill delineation wells?

Also any update as to drilling program in PRL 237 or are we awaiting the joint OSH seismics?

[jft310]

Cyber-The near valuation rise for Interoil will be the Exxon deal and then the Gulf LNG seperate LNG build news. Both can be closed well before year end. How many rigs will be drilling the delineation wells?? Now many rigs will Exxon bring in??When will the PRE rigs arrive?? How many? What about a farm in deal for 236/238???Who??How much will they pay upfront. Lots of ??