2 Asian firms eye PNG gas

KOREA Gas, arguably the world’s top importer of liquefied natural gas by volume, aims to join InterOil’s gas export project in the country.
Korea Gas, known as Kogas, is stitching together a consortium involving Mitsui and Japan Petroleum Exploration  to join InterOil’s proposed gas-export project in PNG as a strategic partner, a source familiar with the matter told Deal Journal Australia.
InterOil said it had mandated Macquarie Capital, Morgan Stanley and UBS to bring in a company with experience in operating large liquefied natural gas, or LNG, production facilities.
On offer was an equity stake in the US$6 billion plant that will convert natural gas to a liquid for export as well as associated infrastructure in Gulf province.
InterOil said it was also willing to sell interests in the Elk and Antelope gas discoveries, along with exploration tenements in PNG.
“The considerable strengthening of the Asian LNG market, the increased interest in exploration and investment in PNG, as well as the company’s reservoir analysis and project design fundamentals lead the company to believe that now is an attractive time to seek a partner,” InterOil had said last September.
PNG had an estimated 22.6 trillion cubic feet of natural gas reserves, according to UK-based consultancy Wood Mackenzie.
But little new local demand for the clean-burning fuel is expected beyond mining developments such as Xstrata’s Frieda River copper-gold project and greater use by households.
It had created an opportunity for some of the world’s biggest energy companies to invest in developing the gas reserves for export as LNG.
PNG was poised to join the ranks of LNG exporters in 2014 when the ExxonMobil-led US$15.7 billion PNG LNG project is scheduled to start.
InterOil, which was listed on the New York Stock Exchange, was proposing to build a minimum 7.6 million-ton-a-year LNG plant fed by the Elk and Antelope fields. Once construction starts, it takes around four to five years before a facility is able to chill its first gas for export as LNG.
The source said South Korean and Japanese companies initially planned to compete separately to join the InterOil project.
But they changed their minds and decided to work together partly to avoid bidding up the price.
InterOil’s advisers asked for bids to be lodged by early December last year but this was extended by a couple of months, the source said.
Kogas was more interested in operating the LNG plant, while Mitsui and Japan Petroleum Exploration – better known as Japex – were focused on securing interests in gas fields and associated liquids such as condensate, a type of light oil.
Kogas would likely select a South Korean engineering company to build the plant, giving it an opportunity to learn the technology.
In an interview with Dow Jones Newswires last year, Kogas president and chief executive Choo Kang-soo named PNG among four countries that it was targeting for a major natural gas field development in the near term. The other countries are the US, China and Venezuela.
Kogas imported nearly 34 million tonnes of LNG last year – the equivalent to nearly triple the LNG volumes shipped into neighbouring China.
InterOil was not alone in hunting for a partner to help develop gas reserves in PNG.