InterOil CEO Says PNG talks with Exxon progressing

By James Paton

July 12, 2013

Businessweek

InterOil Corp. (IOC:US), the explorer in talks with Exxon Mobil Corp. (XOM:US) to develop natural gas discoveries in Papua New Guinea, said negotiations are progressing with the world’s largest energy company by market value.

“It’s moving along nicely,” said Michael Hession, the former Woodside Petroleum Ltd. (WPL) executive named yesterday as InterOil’s chief executive officer. “I’m not disturbed in any way, shape or form. I’d emphasize that Exxon and this negotiation are going to be my number one priority.”
InterOil said in May that it started exclusive discussions with Exxon to develop the gas fields in Papua New Guinea. Exxon is interested in the assets because they may help expand the oil producer’s $19 billion liquefied natural gas project in the country, Mark Nolan, vice president for the Middle East and Australia, told reporters in Brisbane in May.
Hession, who brought PetroChina Co., Mitsubishi Corp. (8058) and Mitsui & Co. into Woodside’s Browse LNG project in Australia in agreements reached last year, said he carried out extensive research into InterOil before joining the company.
“I’ve been in discussions with InterOil for some months, since before I left Woodside,” he said. “It has been a careful and measured courtship.”
InterOil has been searching for international partners to help fund a Papua New Guinea natural gas project since 2009, when Bank of America Corp. (BAC:US)’s Merrill Lynch sold its 35 percent stake in the venture. Phil Mulacek, who founded the company, retired as chief executive officer in April.

Partnership proposals

InterOil said in 2011 that it hired Morgan Stanley, UBS AG and Macquarie Group Ltd. to evaluate partnership proposals. Mulacek said in an October 2011 interview that he expected to sign a partner by the end of that year.
Included in the discussions with Exxon is the potential sale of a stake in a license that comprises the Elk and Antelope fields, InterOil said. Hession declined to provide more information about the talks or say when he expected the negotiations to be completed.
Hession left his position overseeing Woodside’s Browse venture in May after Australia’s second-biggest oil and gas producer scrapped a plan to build the project at an onshore site in Western Australia because it was too expensive. Woodside now is considering using floating LNG technology to develop the Browse project.
InterOil is incorporated in Canada’s Yukon, has offices in Cairns, Australia and Singapore, and is traded in New York. Elk and Antelope hold an estimated 9 trillion cubic feet of recoverable gas, InterOil said in its 2012 annual report.