Wednesday, May 16, 2012

Government seeks to terminate InterOil's Gulf LNG project


The government has served notice on Liquid Niugini Gas Ltd LNGL) – a project company jointly owned by Pacific LNG Operations Ltd and InterOil Corporation - that it intends to terminate the Gulf LNG Project Agreement of December 23, 2009, The National reports.
LNGL has been given 180 days (six months) as of last Friday to show cause as to why the agreement should not be terminated as the government accused it of deviating from the project agreement.
Petroleum and Energy secretary Rendle Rimua dropped the bombshell in a notice of intent to terminate the LNGL project agreement delivered to InterOil on Monday.
He also made it clear that LNGL did not have either one of three compulsory licenses, hence, should not go around making public statements.
According to the notice, LNGL had, by its conduct, demonstrated that it “has no intention of taken any steps under the project agreement (PA) in relation to the project”; and “is instead seeking to progress the Gulf LNG Project”.
“After 180 days, if we don’t resolve this, we will terminate the project agreement,” Rimua told The National yesterday (Tuesday).
“We are still waiting for them (LNGL) to reply.
“Really, they (LNGL) haven’t done anything (about the project agreement).
“As far as the government is concerned, the minister (for Petroleum and Energy William Duma) is the one who signed the project agreement.
“All notices are served by myself, nobody else.”
Rimua said the decision to serve notice on LNGL for project deviation was made after lengthy consultation between senior bureaucrats and lawyers.
“It’s been a team effort,” he said.
“We looked at it very carefully before we made a decision.
“The onus is on them (LNGL) now.
“They have to come good now, renegotiate, whatsoever.
“We’ve told them time and time again and it’s reached this stage.
“Government has made a decision that it doesn’t accept that.
“That’s always been our position since 2009.
“We’ve been telling them that they’ve been deviating from the project agreement.
“State has finally come up and said that we’ve had enough.
“We’ve issued notice because they are deviating.
“The project agreement is between them and us.
“In this case, we don’t like what they are doing.”
Rimua said LNGL did not have either one of three compulsory licenses.
“The project currently does not have a license,” he said.
“What they will require is three forms of license: Petroleum Development License (PDL); Pipeline License (PL); and Petroleum Processing Facility License (PPFL).
“That’s the first problem.”
LNGL, according to its website, has been established to build and operate a gas processing facility delivering LNG and on-shore LNG processing in PNG.


  1. Anonymous11:15 AM

    Congratulations to the PNG Government. This is one of the rare occassions in which PNG is standing up to profit hungry multinational corporations.

    It was obvious that LNGL's deviated plans was to maximize profits by investing in low cost operations and maximizing returns. An offshore facility (floating LNG plant) takes away benefits to governments, landowners, etc.

    W. Orapa
    Port Moresby

  2. Anonymous6:33 PM

    Mr. Orapa, I understand your point of view. But, if I were a PNG national, I would favor a medium sized multinational like IOC, with a long standing history in PNG, to the re-entry of a giant like Shell, whose reputation in various parts of the world is questionable at best. Don't worry, PNG will get a first class operator of the project very soon, and each will have his / her proper share.

    The issue is that there is so much gas and condensate in the ground, that an FLNG and fixed plant will easily co-exist, and complement each other. But to get started, an FLNG / Modular solution, will generate cash flows much faster than a traditional LNG plant, which takes more time to build and is much more costly.

    So, the proposal to build both an FLNG / Modular plant and a fixed LNG plant would benefit PNG government, landowners, etc. most. I believe PNG's budget already takes this into account. But, unfortunately, some politicians like to shoot themselves in the foot.