We don’t think InterOil’s Gulf project has been canceled

Here’s why..

Partner Flex of Norway has explicitly stated this

Nobody would benefit from it, least of all PNG

  • Scrapping the project would bring years of delays for the project (in which the PNG has a direct 22.5% stake and for tax revenues
  • It would be unexplainable because of prior strong public support by the very same politicians
  • It would bring a host of legal issues
  • PNG would invite the rap from the likes of Samsung, Mitsui and their respective governments
  • PNG’s reputation as a friendly FDI destination would be in tatters

The energy minister’s cancellation of InterOil’s Gulf project

  • Was in reaction to the Sunday Chronicle newspaper allegations
  • Which he didn’t deny
  • There are already signs of subtle backtracking on the position, he now says things like “It’s not that we want to shift the Plant to the Central Province” and We’re still behind the project if they comply by the original terms. (see attached newspaper articles), but this is moving away from cancelling the project
  • He can’t backtrack stronger, he has to be able to safe face
  • We have absolutely no reason to believe he has been bribed and do not want to give that impression.

Shell is in a spot of bother

  • The Sunday Chronicle revelations are not good for the company
  • Journalists in several countries (and continents, in fact) are already showing interest in the story
  • Basically, any plans for any ‘back-door’ entry will have been scuppered by this. If they want in, they will have to go through the front-door.

InterOil and a major

  • It seems likely that InterOil will include a major in the project (see for instance what partner Flex of Norway had to say about that)
  • There are many possibilities for this, they could be included in existing plans or be part of additional ones. There is plenty of gas to go around.
  • This isn’t necessarily ‘forced’ upon InterOil, it could very well be that they were open to this all the time

The upshot

  • Delaying, canceling the project is in nobody’s interest, we can’t stress that enough.
  • We don’t think the Gulf project has been canceled, we think it’s still on-track.
  • If anything, the whole IOC venture will be strengthened with the inclusion of a major in the capacity as partial owner and/or operator, or in the capacity of building an additional plant)
  • Needless to say, we think the sell-off in the shares is overdone as do the analysts covering the stock. It’s understandable, there was a murky situation with very scary headlines.

Newspaper articles

2 thoughts on “We don’t think InterOil’s Gulf project has been canceled”

  1. What does IOC give up for a majors help? We haven’t invited a major in because IOC didn’t want dilution.To say nothing about being pushed around.

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