The Exxon Mobile (Oilsearch, Santos) venture has signed an agreement with the PNG government containing details on their proposed LNG venture. Here are the most relevant parts of the newspaper story (as subscription is required):

PNG LNG partner Oil Search said today the terms included a 30% tax rate and an additional profits tax that would apply once “a certain level of return has been achieved”. This would provide a “fair split of the expected future cash flows from the project between the project proponents and the state”.

The agreement’s finalisation lets PNG LNG operator ExxonMobil start front-end engineering and design (FEED), which is expected to take about 16 months to complete. During this period, the joint venture will also be pursuing LNG sales agreements and securing project debt funding and all necessary permits and licences.

A final investment decision is expected late next year. The partners are planning for first cargoes in 2013.

The project which could more than double the size of PNG’s economy within a mere six years according to Australian consultancy firm ACIL Tasman.

The Chamber of Mines and Petroleum told PNGIndustryNews.net that the government is likely to advance its gas agreement discussions with Liquid Niugini Gas now there is a blueprint to work from.

Liquid Niugini Gas CEO Dr Jack Hamilton told PNGIndustryNews.net that discussions had picked up considerably between his company and the PNG Government over the last week.

He said he looked forward to a gas agreement for Liquid Niugini Gasin the near future.

Some interesting points:

• You read that correctly, one LNG facility could double the size of the PNG in six years, but how about two LNG projects?
• It bodes VERY well for InterOil’s refinery. Energy demands will go up a lot, both in the construction phase but also in the operational phase of the LNG facilities, as these are basically big freezers. The growing economy will spread wealth and fuel demands further.
• InterOil knows now more or less what to expect from an agreement with the PNG government. A 30% profit rate seems very fair.
• Negotiations could now quickly end in agreement, which will probably differ little from the Exxon one and there are very few people left thinking that InterOil does not have enough gas after the latest bullish drilling update at Elk4.

In another newspaper article, landowners around Elk4 have met with InterOil and are in agreement with InterOil’s plans. Here’s the article:

Thursday, 22 May 2008

LANDOWNERS at Elk-4 in the Gulf province of southern PNG are onside with InterOil’s gas development plans which could help fund schools and essential services currently unavailable in the area.

Gas sourced from the Elk-Antelope structure is planned to be used by InterOil-backed Liquid Niugini Gas for a liquefied natural gas project that is currently awaiting PNG government approval.

Reported by the National newspaper, landowners of InterOil’s petroleum prospect licence areas 237 and 238 met with Gulf Governor Havila Kavo and said they would work with him and the Canadian company to develop the gas resource.

The landowners, who had not seen their Gulf provincial leaders in 25 years, had walked for one week to catch a plane to Port Moresby for the meeting.

The landowners said they would like to meet with InterOil and looked forward to development in their area, which has no schools, health or essential government services.