INTEROIL Corp, developer of the Elk/Antelope liquefied natural gas (LNG) project, has proposed an offshore processing plant in Gulf province on eve of project agreement signing of the oil company’s first LNG project in PNG.
But Government lawyers did not have enough time to look into this proposal, owing to the signing of the project agreement the very next day.
Likewise, this proposal was not in the initial project agreement discussed between InterOil and the Government.
State Solicitor George Minjihau confirmed this “last- minute” negotiations.
“We had some last minute issues … there were some big issues that InterOil was concerned about but we had to reach an agreement.
“One of the issues was that the company wanted to look at the possibility of building an offshore plant but it was not in the initial proposal.
“We said you (InterOil) cannot bring this thing late to us … and eventually we reached an agreement,” Mr Minjihau said, adding the front end engineering and design (FEED) would determine the location of the plant.
InterOil chief executive officer and Chairman Phil Mulacek said they were looking to have the project agreement “flexible”.
This, he said, was because InterOil, has enough gas reserves from its Elk/Antelope oil wells in Gulf to support two plants at the same time.
“We have found additional gas so we wanted to make sure there was flexibility and the Gulf province wanted to see if there was additional development there,” Mr Mulacek said.
Petroleum and Energy Minister William Duma was satisfied that InterOil has sufficient gas reserves for the US$6.0 billion (K17 billion) two-train LNG facility.
“We said (and promised landowners) we would look at alternatives as well … we have enough gas for Napa Napa (oil refinery) and we now have surplus, so we are now looking at a location in the Gulf as well, and we will run them both in parallel.
“We made that commitment to see if we can foster economic development more diverse for the nation.
“And we are the first ones to do that … and when we say we are not afraid to do that, it’s a tougher job,” Mr Mulacek said recently when asked why negotiations pertaining to the project agreement ended on the eve of the signing ceremony at the Government House.
“We are designing a plant with proven technology that will last for decades, so that means we are going to have a lot of cost efficiencies versus other applications,” he said.
Mr Mulacek said they (project partners) had to be more innovative and if they worked with Gulf governor Havila Kavo and the landowners, there would be important social services delivered.
He said they would also look at land-based facilities – a mix of offshore marine facilities making sure that all in line with the timeline and cost efficiencies.
“While we were negotiating, Australia has already taken 70% of the Japan’s market. Look at the lost opportunity for this country … while people have been negotiating with the rest of the world, Australia grabbed market share.
“So when Prime Minister (Sir Michael Somare) said we expect to be innovative, and go forward, we are going to have it done … we will get it done,” he said.
Meanwhile, preliminary FEED work started three months ago, almost two years behind schedule.
The US$450 million (K1.22 billion) pre-FEED had started and the US$50 million (K136 million) FEED for the LNG itself will start later during the course of the project.