Friday, July 12, 2013

InterOil may pursue new gas-export project in PNG

By Dow Jones Business News

SYDNEY--InterOil Corp. ( IOC ) said Thursday it wants to keep open the option of building a new gas-export plant in Papua New Guinea, potentially putting it at odds with Exxon Mobil Corp.'s ( XOM ) plan to expand an existing project there.
Houston-based InterOil owns the Elk and Antelope gas discoveries in Papua New Guinea, an impoverished Southeast Asian nation that is emerging as an important liquefied natural gas export hub.
In May, InterOil began exclusive talks with Exxon about the latter investing in the fields, without disclosing financial terms or how much of the assets it wants to sell.
"I'm coming onboard to build InterOil into a true LNG player. So it's not my intention that we do a sale without carrying forward any interest in this project," Michael Hession, who was appointed InterOil's chief executive on Thursday, said in a joint interview with InterOil Chairman Gaylen Byker.
Exxon has said it would prefer to use InterOil's gas to support an expansion of its $19 billion Papua New Guinea LNG projects to three production units, also known as trains, from the two that are currently under construction.
However, Mr. Byker said InterOil would like to also consider the potential development of a standalone LNG plant on the country's southern coastline.
"And I think there are real important reasons for the PNG government and the PNG people and the PNG economy to maintain that optionality," Mr. Byker said.
Exxon estimates that it will need between 4 trillion and 5 trillion cubic feet, or TCF, of natural gas to support construction of a third LNG train at PNG LNG.
Mr. Hession said he would take "a long, hard look" at InterOil's assets before providing a definitive estimate of their size.
"They are very respectable multi-TCF fields, which quite probably will be able to support a multi-train development," Mr. Hession said.
The former head of Woodside Petroleum Ltd.'s (WPL.AU) Browse LNG resource, Mr. Hession takes the reins of InterOil at a challenging time for the LNG industry. The specter of cheaper LNG supplies into Asia emerging from North America and East Africa is making project developers in Australia, which neighbours PNG, increasingly nervous.
PNG's cost base, however, is lower than Australia's thanks to its cheaper sources of labor.
"It's got some of the best fiscal terms in the world and it's actually got one of the best cost structures in terms of building these things," Mr. Hession said.
InterOil has been searching for a new CEO since Phil Mulacek retired in April.

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