PNG Government in damage control

Multinational offering $100M to frustrate second LNG project in PNG..

Shell, IOC, PNG

As it happens, this isn’t even in the interest of PNG itself.

  • If Shell were to build and operate a traditional LNG facility, it would take years longer, the newspaper article talks of 2018. That’s a four year delay
  • Building a traditional LNG plant on-location is a daunting logistical task compared to building modular plants (like EWC’s modular plant and Flex/Samsung’s FLNG) under controlled circumstances in wharfs
  • At present, the Exxon/OilSearch LNG project in PNG is building such a traditional (at site) LNG plant, it’s more than a year behind schedule
  • It is doubtful whether PNG even has the capacity to allow for a second logistical nightmare to take place
  • Needless to say what this does for the perception of sovereign risk in PNG.

Needless to say as well what this says about what kind of company Shell is. We’re ashamed of it.

It’s also far from established that InterOil is in breech of it’s Dec 2009 agreement with the PNG government. InterOil just released a PR vehemently denying this.

Also Duma’s stated objections are clearly bogus

  • We remind readers that the change in direction by InterOil (from a traditional LNG plant to be build on-site at Napa Napa next to the refinery) to building a much easier, faster and cheaper modular LNG plant in the Gulf with EWC and an FLNG with Flex/Samsung has been known for a year and a half.
  • During that time, signing ceremonies between InterOil and its new partners have taken place at which much of the PNG political top was present, including energy minister William Duma (for references, see here), who is now clearly lobbying on behalf of Shell.
  • If you still have doubts, than read this.. (see below for the whole article)
  • To call EWC, Flex, Samsung, Mitsui a scattered project with unproven technology and no world-class operator, well, consider the following:
  • Samsung is guaranteeing the workings of the FLNG and up to half is already paid for with the rest not due until delivery
  • EWC just had a similar modular LNG project approved in Indonesia (as well as obtaining finance for it) in which Tokyo Gas expressed a desire to negotiate participation on multiple levels (offtake, participation, right of first refusal for similar projects)
  • Mitsui, well.. to doubt their capabilities is just nonsensical

This was the same Mr. Duma back in Februari of this year:

PNG government will enable IOC to move forward..
Duma lauds LNG pacts


Petroleum and Energy Minister William Duma yesterday applauded the substantial progress being made to fast-track developments of the nation’ second liquefied natural gas (LNG) project.

He said the Somare Government was pleased to note that petroleum explorer, developer and refinery operator InterOil Corporation had locked in reputable partners to advance development of PNG’s second LNG project and a condensate stripping plant.

Mr Duma’s statement follows the signing last Wednesday of both project funding and construction agreement and shareholding agreement by InterOil and its partners, Pacific LNG Operations Ltd and Energy World Corporation (EWC).

The two agreements follow EWC’s announcement in September last year on the formation of a partnership with InterOil and Liquid Niugini Gas Ltd, the joint venture company created by InterOil and Pacific LNG Operations Ltd to develop the LNG project.

Mr Duma said the Somare Government stood ready as a project development partner and beneficiary to approve all enabling legal requirements under the Oil and Gas Act to ensure progress on development of the project was not delayed.

“Wednesday’s signing of the agreement was a powerful message to the foreign investment community and to the government and citizens of PNG that InterOil and its partners were indeed serious long-term investors and developers in PNG,” Mr Duma said.

“On behalf of the Prime Minister Grand Chief Sir Michael Somare and the PNG Government, I express my gratitude to InterOil as a company that has demonstrated in 15 short years that it could build and operate an oil refinery, explore oil and gas and develop its natural gas discoveries at the world class Elk and Antelope reservoirs in the Gulf province into LNG.

“The company’s success in securing reputable international companies to fund and jointly develop its condensates at middle Purari and develop the second LNG processing facility with partners EWC and Pacific LNG Operations Ltd in the Gulf and Inter Oil’s confidence and PNG’s commitment will add value to the Gulf Province and PNG.”

The PNG Government will provide all assistance necessary to make sure InterOil and its project partners, the Gulf Provincial Government and the people to work together in their mutually desired developments and benefit sharing in peace and harmony.
“I commend InterOil for demonstrating that small oil and gas companies can also explore and develop world-class hydrocarbon projects just as capably as any international oil and gas companies where political stability and right conditions exist,” Mr Duma said.

2 thoughts on “PNG Government in damage control”

  1. Great job putting it all in one place. Amazing pick-up of the Sunday Chronicle. Thanks for all the info.

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