the catch-22 of reserves and takeovers, page-12

Yaq,

We agree on quite a lot :-

1. Gas without a Market, no matter how much GIP, is a Resource not a Reserve.
2. There is Too much gas for the local markets
3. Gas Powergen - ERM most likely the other MOUs unlikely
4. LNG export is the Best option

We have speculated before that good faith from Marubeni with an MOU for at least 1mtpa 1200PJ would be the minimum if they were serious. Since the quake you have to wonder whether they are now more focussed domestically ?

I agree that GLNG seems a natural home for ESG gas since STO has such a big stake in ESG the Narrabri JV and its own Gunnedah basin areas.

Without STO or GLNG actually announcing Train 3, a pipeline north and MOU/GSA with ESG to justify it , thereby giving it the Credibility needed by the Certifiers, how could they sanction shifting Resources into 2P. Is it enough that STO is involved in ESG and the JV and also has a GLNG interest. So Certifier sees STO there so asssumes it is certain that ESG gas will be sold to the LNG market. Or Certifier sees LNGN FEED underway so says it is Certain that ESG gas will be sold to the LNG market. I always thought that the Certifier likes to see , especially for a Junior, some higher level of Certainty (MOU, GSA) before converting Resources to Reserves.

What is the Standard of Commerciality Certainty that the Certifier needs. Is TALK enough ? Is ASSOCIATION with significant potential LNG suppliers enough ? Is MOU Better? Is a GSA better still ?

As Reserves form the "Value" of a company the certifiers have to be conservative. The ASX and ASIC are watching.

I would like there to be an increase in Reserves but the sp is telling us something. If there were to be a 2P increase of the order you have speculated approx 200%(+3000PJ to add to the existing 1520PJ) or more ? then why is the sp 57cps?

I see the "2P" category getting an increase of max 25% , on the Association with an LNG channel to market. Without another MOU or other Fact adding to Market certainty I dont see 2P moving too much at all. As long as the MOUs hold I dont see it decreasing. The certifiers probably have little choice other than to rely on them.

The old MOUs supporting 1700PJ are a worry as they are so dated they no longer lend much credible commercial certainty. If they fell away then without substitute LNG MOUs then what would happen ? Also if you dont need MOUs or greater Commercial certainty why has DC been so emphatic about his MOUs supporting his 2P and his "we are not resource constrained , but are Market constrained".

Reserves represent that part of Resources which are Commercially recoverable and have at least been Justified for Development

You wouldnt commit to $1bn to develop the Narrabri JV field unless you had some Market to send the gas to - GLNG, LNGN
That Certainty would be a GSA ?

Reserves must have all Commercial Aspects addressed. Reserves are solely a commercial term and therefore Declaration has Value

It is technical issues which separate Proved(1P) from Unproved categories(Probable and Possible)

An Excerpt from the SPE PRMS 2007 Para 2.1.2
QUOTE (my Bold)
To be included in the Reserves class, a project must be sufficiently defined to establish its commercial viability. There must be a reasonable expectation that all required internal and external approvals will be forthcoming, and there is evidence of firm intention to proceed with development within a reasonable time frame. A reasonable time frame for the initiation of development depends on the specific circumstances and varies according to the scope of the project. While 5 years is recommended as a benchmark, a longer time frame could be applied where, for example, development of economic projects are deferred at the option of the producer for, among other things, market-related reasons, or to meet contractual or strategic objectives. In all cases, the justification for classification as Reserves should be clearly documented.
UNQUOTE

As the above are Guidelines only who knows how "loosely" NSAI will interpret them ? We have to wait and see what 2P increase comes about - your 200%+ or my 25% or "Ezirida"'s 30-60%


Yes ORG would be OK as long as they meet the current generous benchmark of 1mthVWAP+40. Dont forget that having ORG in the fray would satisfy your Multi-Party Auction so we might get STO stepping up to the plate and contesting another Party's first Bid instead of selling out at a sub-breakeven price of $1 and transferring all that Optionality to ORG.


Cheers