PNG government will offer cash for stake in LNG plans

If the deal the PNG government has in mind for the other LNG project, that of Exxon and OilSearch, is anything to go by (and why wouldn’t it?), things look rather promising for InterOil’s plans..

PNG to pay cash for 19.4% PNG LNG stake

  • PRIME Minister Sir Michael Somare has announced the PNG government will pay some K3 billion ($A1.47 billion) in cash for a 19.4% equity in the PNG LNG project and implied the rival Liquid Niugini Gas project will possibly get a green light.
  • The PNG LNG project was recently advanced by constitutional amendments made to better accommodate its needs, especially in regards to construction taxation and employment requirements and legalities.
  • Reported by the National newspaper, Somare offered insight on PNG’s liquefied natural gas future to a crowd of around 300 guests at his surprise 40th anniversary in politics party at the Grand Palace restaurant on Saturday night.
  • “We will, in fact, be paying cash for our equity,” he said of the K3 billion the PNG government will fork out for a stake in PNG LNG.
  • “Not many countries that I know can do that, and I am in fact confident.”
  • Somare reportedly said government negotiations with PNG LNG operator and 41.6% stakeholder ExxonMobil were continuing.
  • He said a big announcement will be made on September 2009 over the LNG project, which will be followed by “a second similar project”.
  • There is also a second LNG project in the pipeline,” he said.
  • With Somare opening the valves for InterOil’s record gas flow of 105 million cubic feet from the last test of Elk-4, it is likely he was referring to InterOil’s one-third backed Liquid Niugini Gas LNG project.
  • Somare said PNG LNG and the second LNG project would provide a base for PNG to stand on in the next 50-60 years but skill shortages were a problem.
  • “We appeal to industries to train our people because by 2014 we would be looking for manpower.
  • “We may get 10,000 overseas people to come and help us initially, and that’s the government’s stand at the moment.”
  • Somare added that PNG needed to be aligned with the international community and said the nation was rich yet also poor.“I think we need to organise ourselves if we want to develop.”
  • PNG LNG is in the front-end engineering and design phase with a final investment decision to made late 2009. The joint venture aims to build a two-train 6.3 million tonne per annum liquefaction plant near Port Moresby with gas sourced from various Oil Search gas and oil fields in PNG.
  • Oil Search holds 34.1% of the project while other stakeholders in PNG LNG include Santos at 17.7%, AGL Energy 3.6% and Nippon Oil 1.8%. Landowner interests hold the remaining 1.2%.
  • Meanwhile, gas from InterOil’s Elk and Antelope structures – in the range of 8-12 trillion cubic feet according to InterOil chief executive Phil Mulacek – is slated for the Liquid Niugini Gas joint venture that aims to build a liquefied natural gas plant near Port Moresby.
  • The $US5-7 billion project is scheduled for production in late 2013 or early 2014 and the JV would ideally like a two-train plant capable of producing up to 9 million tonnes per annum.
  • Liquid Niugini is also one-third owned by Merrill Lynch and long-time backer Clarion Finanz, which holds its interest through subsidiary Pacific LNG.

It is, of coarse, not so easy for the PNG government to raise this kind of cash but they have recently travelled to the Middle East to rich Gulf states for funding. These kind of announcements imply that they are confident about being able to pull it off.

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