new shareholder, page-12

Bob,

I too believe LNGN is do-able. Its economics clearly stack up, and the interest of the Japanese is genuine. But I really don't think ESG staying independent is at all likely - the needs of the 4 QLD projects will see to that. It won't be ESG who will be doing the back end of LNGN, or supplying QLD for that matter. Another party will be doing that. It just remains to be seen who that party is, what they have to pay, and when.

I recently read a summary of the LNG projects by Craigs Investment partners. Amongst other information, it gave a % likelihood of each project (and indeed each train within each project) going ahead. Now, this was just an opinion/analysis, but they put the likelihood of LNGN going ahead at zero.

Could it be that Craigs, like RBS Morgan and many others, think that ESG going up the foodchain is far more likely than not?

The other question I would have about the viability of ESG remaining independent is, how much faith should we put in ESG doing its own full-field development? Now I know that ESG has had a number of externalities that have held them up. But even so, the speed at which pilots are drilled does not inspire confidence that ESG, as an organization, has the maturity to run its own full-field development involving hundreds of wells.

Surely, ESG know this. They are upstream O&G explorers. That is where their core competency lies. As an organization, they have a long way to go in terms of maturity to control large complex projects. And if you do want to become a large, independent company, issues like the relationship with OIP cannot happen. Large and mature companies require higher standards of governance than that displayed towards OIP and its conflicted investment proposals.

It is these sorts of issues that need to be sorted out for ESG to go beyond a circle of wealthy friends who are sitting on world-class assets, to an organisation who is mature enough to develop those assets effectively.

ESG's plan is to create commercial tension, develop their reserves and their commercial options to a point where the majors (competing against each other) are prepared to pay the big bucks to secure the gas. The majors will then do the heavy lifting of the full-field development and the LNG front ends, and everything in between.

Everything else is just a threat to get the price up.

Yaq