Gulf LNG projects hits more hitches

By MALUM NALU

The proposed Gulf LNG project has hit more hitches, according to the fourth quarter and 2011 financial report of one of the major stakeholders, Flex LNG, The National reports.

Flex admitted in its just-released financial report that the Gulf LNG project had lapsed due to “lack of progress” and it was unable to forecast the expected timing of a final investment decision (FID).

Loss before tax was US$4.6 million in the quarter and US$23.6 million year-to-date, with a year-to-date retained net loss of US$23.7 million.

In the year and quarter, there have also been additional Gulf LNG project related costs.

The admission came just weeks after Shell, one of the largest energy and petrochemical companies in the world, returned to Papua New Guinea last month (February) and there is already speculation that it is being mooted as heir-apparent in the Gulf LNG project.

Prime Minister Peter O'Neill welcoming back Shell to PNG last month. Industry sources say Shell is heir-apparent in the Gulf LNG project.

Shell sources in Singapore, however, declined to comment when contacted by The National.

In April 2011, Flex announced that it had signed agreements with InterOil Corporation (IOC), Pacific LNG Operations (PACLNG) and Samsung for a floating liquefaction (FLNG) project in PNG (the ‘Gulf LNG Project’) with targeted start of operations in 2014.

The Gulf LNG project was expected to have liquefied and exported gas from the Elk and Antelope gas fields in the Gulf province.

Last September, however, the InterOil-proposed Gulf LNG project was dumped by cabinet on grounds that it deviated from the original project agreement.

 InterOil, in reply then, said it was still committed to delivering a world-class Gulf LNG project in compliance with the 2009 agreement with the government.

Gulf Governor Havila Kavo, in parliament two weeks ago, called on Prime Minister Peter O’Neill and petroleum and energy minister William Duma to explain why Shell was allowed to return to PNG and take over the Gulf LNG project.

“The objective had been for the Gulf LNG Project to have reached a final investment decision (FID) in December 2011,” according to the Flex LNG report.

“In December 2011, the multi-party agreements among IOC, PACLNG and Samsung and the framework agreement between Flex and the sponsors of the Gulf LNG Project lapsed due to lack of progress with the Gulf LNG project.

“Flex LNG is currently unable to forecast the expected timing of a potential FID for the Gulf LNG project.

“With the front-end engineering and design (FEED) work that has been executed, the company has taken the technical preparations necessary to support FID, if and when the project sponsors, the PNG government and other stakeholders are able to finalise project terms.

“Flex LNG continues to work closely in providing ongoing technical assistance to IOC and PACLNG.

“In light of the uncertainty surrounding the timing of FID for the Gulf LNG project, the 2011 preliminary agreement between Flex LNG and Samsung has lapsed and the parties have now expanded the scope of their discussions to include negotiations for the alternative deployment of the capital invested by Flex LNG.”