InterOil Approached by Gas Buyers Interested in PNG Stake

InterOil Corp. (IOC), an explorer planning to develop Papua New Guinea’s second gas export project with Total SA (FP), said it has been approached by potential customers interested in buying a stake in the venture.

Total, Europe’s third-largest oil producer, acquired 40.1 percent of the Elk and Antelope gas discoveries in the Pacific nation, leaving InterOil with 35.5 percent, the companies said today. They would follow Exxon Mobil Corp. (XOM)’s $19 billion liquefied natural gas venture in Papua New Guinea, which is scheduled to begin shipments this year. Seven other projects in Australia are also proceeding to tap increasing Asian demand.

The decision to go ahead with a LNG project based on the Elk and Antelope fields may be two or three years away, InterOil Chief Executive Officer Michael Hession said today in a phone interview. Sales could begin in 2020, he said.

“Often you see a situation where potential gas buyers take equity stakes” in LNG ventures, Hession said. “We’ve got a very material stake. We’re the second biggest holder, after Total, and that gives us some degree of flexibility.”

While gas customers have expressed interest in the project, InterOil hasn’t started any discussions about reducing its ownership further, he said. The Papua New Guinea government also has the right to acquire part of the license, he said.

“Those conversations will go on during the two-year economic analysis of this, and will be part of a final investment decision,” Hession said. “Yes, we have been approached by buyers, but we’re nowhere near a decision to sell down” or sign any supply contracts, he said.

Further Payments

InterOil and Total want to get the gas from the Elk and Antelope fields to the market as soon as possible, Hession said. Asked whether the companies prefer a standalone LNG project or if the gas could be used to expand Exxon’s venture, Hession said “the best commercial outcome will prevail.”

Total acquired its Elk and Antelope holding for an initial $401 million in today’s deal, agreeing to make further payments depending on the investment decision, the start of shipments and the size of the gas resources.

The deal is a revision to an accord signed in December, which was necessary after Oil Search, Papua New Guinea’s largest oil producer, bought 22.8 percent of the license from minority holders for an initial $900 million. InterOil in the initial agreement had agreed to sell Total a 61.3 percent stake.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Keith Gosman

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