InterOil says PNG government has no right to cancel agreement

REUTERS

Shares fall up to 18%

InterOil Corp said Papua New Guinea's energy department planned to cancel approval for its $6 billion liquefied natural gas complex but it was confident the project could be saved.
The department asked the company last year to revise plans for the Gulf LNG project, which is slated to go on line in 2014, saying that InterOil had deviated from the original agreement.
The government had originally approved a plan for production of 7.6 to 10.6 million tonnes per annum (mtpa). InterOil's website now says production would eventually ramp up to 8 mtpa.
InterOil said the government had no right to end the agreement and that it had the support of Prime Minister Peter O'Neill, who faces an election June.
"PNG continues to have political flux as we get closer to the main election date," InterOil CEO Phil Mulacek said on a call with analysts.
InterOil - an oil producer, refiner and petroleum retailer - has almost all of its operations in Papua New Guinea.
The company said it has been in talks with the government since learning through an unofficial source that the Department of Petroleum and Energy planned to cancel the agreement, which was signed in 2009. A notice would activate a six-month consultation period during which InterOil would have to address concerns.
"This appears to be an escalation of the recent problems InterOil has encountered with the department's minister, William Duma," Raymond James analysts wrote in a note.
Duma has said the developers are promoting a fragmented project and that none of the companies currently involved has the experience necessary to operate a world class operation.
There has been no formal notice from the government, Mulacek said.
InterOil chief financial officer Collin Visaggio said the company believed all the requirements of the 2009 LNG project agreement would be met. "That's what we are discussing with the government and the various bureaucracy," he said on the call.
Government officials could not be reached for comment.
InterOil shares fell as much as 18% to $47.36 on Monday, their lowest in almost two months.
The company, which has been seeking an operating and equity partner to develop the project, said it would start talks with "significant industry participants" this quarter.
InterOil is developing the project with energy investor Pacific LNG in a joint venture called Liquid Niugini Gas Ltd.
Exxon Mobil Corp is already building a $15.7 billion gas export project in Papua New Guinea.
InterOil also said on Monday its first-quarter net profit rose to $9.4 million, or 19 cents per share, from $700,000, or 1 cent per share, a year earlier. Revenue rose 18 percent to $338.2 million.
The company's shares were down 9% at $52.56 in early afternoon trading on the New York Stock Exchange.

PNG Investors Manual launched

The second edition of the ‘PNG Investors’ Manual’ has been released and is available through the Investment Promotion Authority and the Port Moresby Chamber of Commerce and Industry (POMCCI) , with copies soon to be available in Lae at the Lae Chamber of Commerce and Industry (LCCI) . Copies are also being distributed to PNG foreign missions around the world.
POMCCI chief executive officer, David Conn said following on from the first edition released in 2011, it served as a handbook for anyone interested in investing or doing business in Papua New Guinea.
“A joint production by the Asian Development Bank , the Investment Promotion Authority and the Port Moresby Chamber, it can be obtained free of charge or accessed online and in eBook format at http://www.pomcci.com/ ,” he said.
“ To allow the publication to be freely available to as many people as possible , other sponsors included Deloitte , Gadens Lawyers , Pacific MMI , Remington Technologies, Digicel , Cadden Crowe Pacific and Bank South Pacific
“Sections include general information on PNG, commentary on the economy and investment environment, a living and working in PNG section by Cadden Crowe, a complete section on our legal system and laws for foreign investors by Gadens Lawyers, overview of key industrial sectors with expert commentary on the resource sector from Greg Anderson at the Chamber of Mines and Petroleum, a comprehensive tax overview from Deloitte and a PNG business directory.”
Also available from the Chamber Bizcentre is a new ‘Moresby Map’, available in a handy pocket size, featuring key visitor and business points of interest around the city, with emergency numbers and even a guide to taxi fares issued by the Independent. Consumer and Competition Commission (ICCC).
Conn jokingly commented: “Good luck with that, there is no guarantee you will get that actual fare but at least it is a point to start your negotiations!”

Gas project status impresses Duma

By MALUM NALU
 

Petroleum and Energy Minister William Duma says he is very impressed with the progress of work on the PNG LNG project, despite the numerous problems encountered by developer Esso Highlands, The National reports.

Duma, a key state player for the project right from the beginning, gave the thumbs-up after visiting the massive multi-billion liquefaction and storage facility site outside Port Moresby last Friday.

Duma (left) with Graham on the observation deck of the project site last Friday.-Nationalpic by MALUM NALU

Full construction commenced in 2010, following the final investment decision (FID), of December 8, 2009.

Duma was told by senior Esso Highlands executives, including managing director Peter Graham that the plant was on target and on track to be completed in early 2014, in time for first exports later that year.

The statistics of the 16km perimeter project, which currently employs over 8,000 people from all over the world, are mind-boggling.

It is the final stage of a 700km-plus journey from Hides and Angore (Southern Highlands), and Juha (Western).

The main component of the project is construction of the two massive trains, which super cool the gas to a temperature of minus 272 degrees Celsius before moving them to the two mammoth tanks, which in turn move the liquid gas to waiting ships at sea for export.

"More than what I expected," an impressed Duma said.

"Very impressive.

The PNG LNG project - the biggest development in Papua New Guinea’s history - is well into accomplishing many components after two years in the construction phase.

The 3.2km long Komo airfield in Southern Highlands - which will be longer than Port Moresby’s 2.8km long Jackson Airport - has now completed 50% of earthworks to lay the foundation, with the runway aggregate base course pavement commencing.

The completion of Komo would allow the Hides gas conditioning plant to complete construction.

The Komo airfield would be used to transport huge pieces of equipment to complete the conditioning plant.

More than 100km of 300km of the onshore pipeline between the gas fields and Kopi in Gulf province had been completed, while laying of the 400km offshore pipeline between Kopi and Port Moresby was proceeding was expected to be completed by the end of this month.

“I’ve been pushing for this project right from the beginning and I’m pleased to see that everything is on target,” Duma said.

“This includes the gas agreement, which was negotiated from 2007-2008 with signing in May 2008, 

“Licence-based benefits sharing agreement (LBBSA) was negotiated from 2008-2009.

“Benefits sharing agreement (BSA) was signed in May 2009 and umbrella benefits sharing agreement (UBSA) thereafter in December 2009.”

Next prime minister may still not be the people's choice

By REG RENAGI

Some recent media comments have raised speculations as to who should be the next prime minister in the next government? 
There are many variables here and it really does not matter who we personally prefer to see as the next PM. 
The reality to date is it's the political party with the biggest number of members wining their electoral seats after the polls will formally be invited by the governor-general to form the next government.
 The other parties who get lucky to form partnerships with the larger party will next become the ruling coalition government. 
The remaining leftovers will either become part of the parliamentary opposition party or end up in the middle-benches (if any). 
With due respects to the pictures of the four men depicted here in a weekend newspaper, I don't think they cut it to be the next best CEO of PNG Inc. 
We need to have some good serious contenders for the job of 'first among equals' but the line up we have so far is not very encouraging. 
While there may be one or two good potential PM material; known deficiencies still remain. 
These men may have not had their first 'baptism of fire' yet as MPs, either still very inexperienced as professional 'pollies' and still need to serve a term, or two yet as a minimum basic requirement in the "people's assembly" before citizens' can regard them as possible serious contenders for the PM's post. The prime minister is a serious job and so only the 'best man for the job' (with many very good professional attributes) should get this top post for PNG. 
The job of the PM must not go to any man just because his particular party has the largest number of winning members. 
To date, PNG has a poor record of performances by PMs from past experiences.
 So the country needs a very good criteria for determining the next best PM for the government in parliament. 
 As it is now, the status quo is still a very much flawed system, because we could still end up having an 'asshole' for a PM for our country!

‘PNG stole my kids,' says pilot

From: AAP
AN Australian pilot wrongfully imprisoned on child sex tourism charges says his children have been abducted.
Fred Martens, 62, accused Papua New Guinea's child services department, Lukautim Pikinini, of being involved in the abduction.

Wants his kids: Frederick Martens says he is being prevented from seeing his children who were taken away when he was wrongfully accused of a crime. Picture: Jake Nowakowski Cairns Post

Mr Martens said his two sons, aged six and eight, were abducted by his former partner five years ago, shortly after he was sentenced in 2006 to three years' jail by the Cairns Supreme Court of raping a 14-year-old girl in PNG.
He was released in 2009, having spent nearly 1000 days in custody, after supporters obtained PNG flight records proving he couldn't have been with the girl around the time of the alleged offence.
Mr Martens has since been locked in an 18-month battle with the department to see his two sons, and last week formally requested the director of Lukautim Pikinini (child welfare), Isabel Salatiel, to intervene on his behalf.
He alleges his former partner, Mittie Katu, took his eight- and six-year-old sons to Kella Village in Morobe province in the nation's east, despite having no biological relationship with the boys.
"The biological and rightful family members including myself ... have been denied rightful access to our children by Ms Mittie Katu and the residents of Kella Village, where they are being kept against their will in this `community imprisonment'," he said in a letter to Ms Salatiel.
"This deprivation of liberty constitutes a criminal act."
In December last year Mr Martens met his five-year-old son, Lee, for the first time in Cairns airport.
The latest hold-up in seeing his other children came after a Lukautim case officer, who he says is an old friend of Ms Katu, made a snap decision to insist the boys' biological mother be present at a case meeting in Port Moresby.
That woman, who is now in another relationship, had already attended numerous welfare meetings in Lae in 2010 and in February 2011 travelled to Kella village to see the children.
There she, along with the boys' grandparents, were refused landing on the village beach by Ms Katu's family when they travelled there by dinghy.
"I want to reunite my family and I can't because of corruption and the Wantok (one-talk) system," Mr Martens said.
Attempts to contact Lukautim Pikinini yesterday were unsuccessful.
Mr Martens is also suing the Australian government for $45 million over his imprisonment ordeal.
At the time of his arrest, Australian authorities claimed the flight records eventually used to clear his name did not exist.
He says a number of businesses, properties and equipment in PNG were lost because of his imprisonment in Australia.
They include Pioneer Health Services, the country's flying doctor service, which was founded by Mr Martens, as well as engineering and construction firms and a security firm.

Third train now a certainty for PNG LNG Project

By BRIAN GOMEZ*

Oil and gas explorers in Papua New Guinea have never had it so good despite the unprecedented political turmoil in the past nine months.

The US$15.7 billion PNG LNG Project looks certain to commit to construction of a third LNG train at its gleaming new 2-train plant under construction just outside Port Moresby.

With that commitment overall export capacity by the ExxonMobil-led consortium, which includes Oil Search and Santos, will rise from 6.6 million tonnes to around 10 million tonnes annually.

LNG exports are set to commence in 2014 to utilities in China, Japan and Taiwan.

The projected expansion would greatly increase profitability of the nation’s first LNG export facility. The current support infrastructure, including a 740km pipeline, will be able to supply the third LNG train.

“This outcome has virtually been assured with the better than anticipated result at the P’nyang South-1 and sidetrack that is presently being completed,” commented an industry source.

The field’s estimated 1.5 trillion cubic feet proven and probable (2P) resource has been doubled to around 3 tcf in view of P’nyang’s impressive 650m gas column.

With 9 tcf committed from the current LNG area, the additional 3 tcf will go a long way towards satisfying a third train.

Development and appraisal drilling will commence around June on the big Hides gas field, the mainstay of the LNG venture, where the gas-water contact has yet to be determined.

The proven or P1 resource at Hides amounts to 3 tcf with the new drilling aimed at upgrading the additional 9.5 tcf in the probable and possible resource categories.

“If all this becomes available the project will have more than it needs for a third train and on the way to considering a fourth train,” said an industry participant, noting that at least 0.5 tcf has recently been added in PNG’s producing oilfields.

 News about the success of P’nyang South-1, and speculation about early approval for a third LNG train, saw Oil Search shares rise to an all-time high of A$7.52 on April 26 before easing back.

The evolving P’nyang and Hides story seems just the tip of an iceberg that is forcing global energy players to take note of PNG after the virtual collapse of hydrocarbon exploration activity in the previous 10 to 15 years.

Still somewhat on the sidelines is the New York listed InterOil, which for more than five years had been suggesting it may enter export markets even before ExxonMobil’s PNG LNG Project.

It obtained PNG government development approval in late 2009 at about the same time as ExxonMobil, but kept changing its goalposts to the annoyance of PNG’s Petroleum & Energy Minister William Duma.

InterOil anticipates that a final investment decision could be forthcoming by the year end.

The market was nevertheless taken by surprise when InterOil announced a few days ago that it had farmed out a 10% stake in PPL 237 (Petroleum Prospecting Licence) and its planned Triceratops well for staged cash payments of US$116 million and additional project and resource payments with a combined value of US$345 million.

The PNG newcomer in this deal is Pacific Rubiales Energy, a Toronto-listed company with crude oil production in Colombia of over 250,000 barrels a day.

The potential of PPL237 is not known, but InterOil boasts 8.6 tcf of natural gas and 128.9 million barrels of condensate at its nearby Elk and Antelope fields, which are the subject of government approval.

Minister Duma has been reported to favour the entry of Shell and has insisted that InterOil partners with a reputable global producer, a process that is currently underway.

“This sale (to Pacific Rubiales) is not associated with the planned sale of an interest in the Elk and Antelope fields and related LNG equity partnering process targeted for the second quarter of 2012,” commented InterOil’s chief executive, Phil Mulacek.

Canada’s Talisman Energy, was a reluctant starter in PNG’s LNG stakes some three years ago when it tried to sell off its interest in the offshore Pandora gas field.

It changed tack because of pathetic responses and embarked on a gas aggregation strategy in the then neglected Western Province. In the next couple of years it will commence condensate exports and it aims to prove up enough gas for a three million tonnes a year LNG operation.

These prospects received a major fillip in late February when the Japanese trading giant, Mitsubishi, invested US$280 million for a 20% stake in nine leases that Talisman held with a number of Australian-listed oil juniors, including New Guinea Energy, Kina Petroleum and Horizon Oil.

Despite a difficult story when it first listed at 20c on Dec 19 last year, Kina has since enjoyed a Cinderalla performance with its shares hitting a record 40c on May 1, a 100% rise in just over four months.

Oil Search, historically the single biggest player with a PNG history dating back to 1929, is meantime stepping up plans to discover enough reserves in the Gulf of Papua region for a separate standalone LNG operation.

*Brian Gomez, a former resources editor with The Australian, has spent the past decade working in Papua New Guinea

Pictures of the LNG project site

By MALUM NALU

I visited the massive multi-billion Exxon Mobil LNG project site outside Port Moresby yesterday (Friday) afternoon, where I accompanied Petroleum and Energy Minister William Duma, who pushed hard for this project to become a reality.

Minister Duma with Esso Highlands Ltd managing director Peter Graham on the observation deck of the project site yesterday. All pictures@MALUM NALU

Work is progressing well, on target, with more than 8,000 workers currently on site.
Things have changed so much since I last visited two months ago.
"More than what I expected," an impressed Duma said.
"Very impressive.
"I'm very pleased with what Exxon Mobil has done."