O’Neill back-flips on InterOil’s project devt

By YEHIURA
HRIEHWAZI
PRIME Minister Peter O’Neill last Friday did a back-flip to cater for InterOil Corp’s push for a smaller and fragmented development of its Antelope and Elk gas resources in the Gulf province, outside of the December 2009 project agreement.
Petroleum Minister William Duma and his departmental head Rendle Rimua, who had been vocal against InterOil’s deviation from project agreement, were not present when O’Neill made the about- face.
O’Neill had signed a cabinet decision of Sept 21 that if InterOil pursued the fragmented project, then it would commit a “repudiatory breach”  and the state may terminate the agreement.
The 2009 contract signed then by the Somare government was for a large scale single LNG project – similar to the PNG LNG project led by ExxonMobil – and as a result, the InterOil project was awarded huge tax concessions.
However, the company deviated from that agreement and had been promoting a phased project with on-land gas stripping plant and a floating LNG facility much to the anxiety of Duma, who threatened InterOil with termination of the contract.
Rimua had written a lot of letters to InterOil reminding it to conform to the contract obligations it signed with the state.
But last Friday, InterOil was hosted by the Prime Minister in a very short ceremony at his Parliamentary conference room where he witnessed the signing of a non-binding heads of agreement between InterOil and Cyprus gas moving and forwarding company Gunvor to lift InterOil’s gas to overseas markets.
During this signing, O’Neill was understood to have committed to the developers that the state would amend the earlier project agreement to cater for the revised scope of the project peddled by InterOil.
Most journalists invited to the ceremony arrived late and were given an unsigned copy of the prime minister’s talking points in which he purportedly changed the government position.
Liquid Niugini Gas Ltd (LNGL), a company jointly owned by InterOil Corp and Pacific LNG Operations Ltd, the heads of agreement (HOA) to supply one million tonnes of LNG a year for 15 years to Gunvor Singapore Pte Ltd  – subsidiary of Gunvor based in Russia.
The ceremony was also witnessed by Gulf Governor Havila Kavo and one other  minister
LNGL was developing liquefaction and associated facilities in the Gulf province with contractors FLEX LNG, South Korea’s engineering giant Samsung and Japanese manufacturing company, Mitsui.
While the agreement was not binding, NYSE-listed InterOil said it provided the basis to negotiate and document terms for the eventual execution of a binding sales and purchase agreement (SPA) with the Russian company’s Singapore office by the second quarter of 2012.
In a reaction, InterOil CEO Phil Mulacek said: “InterOil is proud to work with Gunvor, one of the largest energy commodity movers in the world.
“With 2.3 million tonnes/year now committed under HOAs, InterOil has preliminary LNG off-take arrangements for more than 50% of its start-up LNG volumes.
“We expect the HOAs to facilitate remaining infrastructure financing arrangements with binding SPA, driving robust debt coverage for the Gulf LNG project.”
Liquid Niugini Gas vice-president Conrad Kerr said: “Gunvor has become an established player in the LNG industry through its success in acquiring, and moving large amounts of short-term LNG cargoes in the last few years.
“We are interested in value optimisation for our LNG, and a long-term relationship with Gunvor enhances this strategy.”
InterOil Corp was developing a vertically integrated energy business with primary focus on Papua New Guinea and the surrounding region.
The company’s assets consist of petroleum licences covering about 3.9 million acres, an oil refinery, and retail and commercial distribution facilities in Papua New Guinea.
Through its global offices in Geneva, Singapore and Nassau, Bahamas Gunvor Group is the world’s third largest independent oil trading company by turnover.
The company also trades a broad range of other energy commodities including coal, gas, LNG, and emissions.
Pacific LNG is an affiliate of Clarion Finanz AG, a private company specialised in energy and mining investments.
Pacific LNG owned an economic interest of about 20% in the Elk Antelope fields, 47.5 % of Liquid Niugini Gas and is a large shareholder of InterOil