Interesting stuff, the plot thickens..

Gulf LNG project partners return fire
Blair Price
Friday, 30 September 2011

INTEROIL and its key joint venture partner Pacific LNG have struck back at criticism of their Gulf LNG project from Papua New Guinea’s Petroleum and Energy Minister William Duma. Pacific LNG also believes the project is supported by Prime Minister Peter O’Neill.

Duma recently revealed the Gulf LNG project had been rejected by the national executive council of the O’Neill government, and claimed that the proposed development did not match the government’s agreement over the project, struck in late 2009.

There are differences between the Gulf LNG project and its earlier incarnation, known as the Liquid Niugini Gas project.

While the Liquid Niugini project was aimed at building a 6-9 million tonnes per annum LNG plant adjacent to InterOil’s Napa Napa oil refinery near Port Moresby, the Gulf LNG project is based on an onshore LNG plant in Gulf province along with an offshore floating LNG facility, for a total of 5MMtpa in 2014.

Duma said the Gulf LNG project was “fragmented” and lacked a “world class operator”.

He also warned that if the project was advanced as it is then the proponents would “inevitably reach a point of committing a repudiatory breach” of the project agreement with the government.

InterOil responded by saying that the project was being developed in accordance with the government project agreement.

“It is unfortunate that such assertions are being made by the minister of petroleum and energy on the basis of preliminary interpretations of complex and permissive contractual definitions while the project continues to develop,” InterOil said.

“As a company with a long history and all of its operations and business in PNG, InterOil hopes that these actions, together with the recent period of substantial change in PNG’s national government, do not undermine PNG’s status as a favourable country for foreign investment and international business.”

Pacific LNG jointly owns Gulf LNG project partner Liquid Niugini Gas Limited with InterOil and also responded to some of Duma’s criticism.

Pacific LNG said it had not been officially informed by the PNG government of any NEC decision on the project – meaning it found out through the media.

The project partner also said it was “very mindful” of the terms in the project agreement with the government and will ensure the project falls within them.

On the changes since the Liquid Niugini Gas project days, Pacific LNG said the initial Napa Napa site appeared to make less sense than a Gulf province site for the LNG plant based on economic and technical analysis that had since been undertaken.

“Pacific LNG thinks that the Gulf site has additional advantages for the state as it will spread development into an area of PNG not endowed with any such opportunities at present and away from the relative congestion of Port Moresby,” the company said.

“This is supported by the prime minister, the cabinet ministers of the Gulf province and the Gulf province governor.”

Duma’s comments that the Gulf LNG project needed a world-class operator came a month after oil giant Shell struck a strategic alliance with state-owned Petromin to pursue hydrocarbon opportunities within PNG, even though Petromin mostly holds mineral-related interests.

The minister’s recent comments also came while O’Neill was out of the country to attend the United Nations General Assembly in New York.

Pacific LNG said it was engaged in a continuing process to ensure that a suitable operator was found for the project and this would be completed within the agreed timelines.

The Gulf LNG project is targeting 5MMtpa in 2014 – with 3MMtpa from the EWC-developed onshore modular LNG plant and the rest from a floating LNG facility.

An expansion is slated to ramp up the total Gulf operations to 8MMtpa through 2015 and 2016.

O’Neill has previously rated InterOil’s Gulf project as the same importance to PNG as the ExxonMobil-led PNG LNG project, and became prime minister courtesy of a controversial parliament vote in early August which is subject to an underway Supreme Court challenge.

Meanwhile, representatives of two landowner groups from the Gulf LNG project area have called for Duma to be sacked for misleading the people, government and project developers according to The National.

In a joint statement they reportedly asked: “Why is he [Duma] advising the government to stop the project when he was the minister who signed the agreement and was making good promotional presentation on the project?”

“If [the project] is removed, then we will remain poor.”