|Friday, 1 June 2012Blair Price|
SPECULATION around the InterOil-led Gulf LNG project is peaking ahead of Papua New Guinea’s looming election. Shell, Chevron and even BP have been named as potential bidders while PNG Petroleum Minister William Duma has reportedly issued a project termination notice against InterOil.
|PNG Petroleum and Energy Minister William Duma|
Every five years PNG is victim to what many refer to as the “silly season” of election-campaigning.
Duma has boldly claimed he has “delivered” two LNG projects during his campaign trail already. While the ExxonMobil-led PNG LNG project is on track for exports in 2014, any declaration that Gulf LNG is delivered is premature.
After all, Duma created a lot of uncertainty around the project by making very public criticism that it lacked a world-class LNG operator as required by InterOil’s project agreement with the PNG government in late 2009.
InterOil responded by starting a formal process run by three investment banks to bring in a suitable LNG operator and this has been ongoing since October.
Duma has made no secret of his view that Royal Dutch Shell would make a good candidate for this role, but this week, PNG Treasurer Don Polye revealed that Chevron was in the running.
Of course, confidentiality agreements prevent corporate revelations during any joint venture talks, but containing politicians in campaign mode is another matter.
Polye told The National he met with representatives of Chevron who were in PNG to “look at” the Gulf LNG project.
He even reportedly said “Chevron’s comeback” to PNG to develop the country’s second-largest LNG project was positive assurance of investor confidence. Chevron most notably discovered the Kutubu oil field (which is also a PNG LNG project field) in the Southern Highlands in 1986 but the acquisition of its PNG subsidiary by Oil Search was finalised in 2003.
After this press report, Duma told the PNG newspaper he had not met with any Chevron representatives or seen a project proposal from that oil major.
“I know Polye only encouraged Chevron to invest here,” Duma told The National.
He reportedly said any commercial decision is for InterOil, before name dropping BP.
“Also, in my case as petroleum minister, I can only invite and encourage any major oil company, whether it is Chevron, Shell or BP, to invest here and have a partnership with InterOil,” Duma reportedly said.
The Australian Financial Review has since reported that Duma issued a notice that the Department of Petroleum and Energy will terminate the 2009 project agreement with InterOil in 180 days.
This notice takes into account how the project has changed scope in recent years. Back in 2009, the project was known as Liquid Niugini Gas and was based on a 7.6-10.6Mtpa LNG plant near Port Moresby.
As of last year, InterOil the rebadged Gulf LNG project was targeting five million tonnes per annum in 2014, with 3Mtpa from an Energy World Corporation-designed onshore modular LNG plant in Gulf province and the rest from a floating LNG facility.
There was also a proposed ramp-up aiming to hit up to 8Mtpa from the total project through 2015 and 2016.
“Unfortunately InterOil has for too long insisted on a development structure which is designed to only meet its objectives of controlling the asset and the pace of developing it,” Duma reportedly said in a statement on the project termination notice.
“In the face of continuing obstruction of the implementation of the 2009 project agreement by InterOil and Liquid Niugini Gas Ltd, I have therefore been left with no choice but to issue a notice of intention to terminate the project agreement.”
However, InterOil had foreknowledge of such a move two weeks ago. In mid-May it announced a copy of a notice of intention to cancel the 2009 LNG Project agreement was received through an unofficial channel.
“Having considered the issue carefully with our external advisers, we are strongly of the view that the State has no right at present to terminate the project agreement,” InterOil said at the time.
“The notice does activate a six month consultation period during which the parties are to explore steps to deal with or remedy the DPE’s concerns.”
On Friday InterOil chief executive officer Phil Mulacek told PNGIndustryNews.net that “suitable, proven LNG operators” were part of the bidding but he could not comment on the “final process yet”.
He also said Interoil has scheduled meetings with Duma and DPE secretary Rendle Rimua, but there were political delays due to the recent Supreme Court decision which found that Peter O’Neill was not the rightful prime minister.
O’Neill was voted in as PM again during a special sitting of parliament earlier this week and has previously been supportive of the Gulf LNG project goals.
Voting for the election will start on June 23 and continue through to July 6. The election writs are due back on July 27.
Both Duma and Polye have told their constituencies they would like to be PM.
InterOil’s LNG plans are underpinned by its Elk-Antelope discoveries in Gulf province. Last month Colombian oil producer Pacific Rubiales Energy agreed to buy a 10% stake of the adjacent licence which hosts InterOil’s recently successful Triceratops-2 well.
More testing of the well’s deeper zone is underway. It is believed to host “moveable hydrocarbons”.
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