Top Financial News Mon, 16 Dec 2002, 5:36pm EST M.I.M. in Talks to Buy Natural Gas From Exxon's PNG Pipeline By Angela Macdonald-Smith
Brisbane, Australia, Dec. 16 (Bloomberg) -- M.I.M. Holdings Ltd. said it's in talks to buy natural gas from Exxon Mobil Corp.'s proposed $3.5 billion Papua New Guinea pipeline project.
The project, which will involve building a 4,000-kilometer pipeline to northern Australia, last week signed up TXU Corp.'s Australian unit as its third customer. It needs to sign more customers by the end of the month to meet delivery deadlines starting in 2006.
Exxon Mobil, the world's biggest publicly traded oil company, and its partners want to build the pipeline to tap gas consumption in Australia that's expected to grow 3.4 percent annually in the next 20 years. M.I.M. may use gas for a zinc project at MacArthur River in the Northern Territory.
``We're in commercial negotiations with the PNG gas project and we have been for several months,'' said Collin Myers' an M.I.M. spokesman in an interview. ``We also have the opportunity to look at coal-generated power from our own coal sources -- that's the competition.''
Shares in Oil Search, which holds a 45 percent interest in the pipeline project, rose 2 cents, or 2.7 percent, to 77 cents on the Australian Stock Exchange. They have risen almost a fifth since last Monday.
M.I.M., the world's fifth-largest coal exporter, had been studying buying gas from the Woodside Petroleum Ltd.-operated Sunrise project in the Timor Sea, which earlier this month scrapped plans to sell gas in the domestic market.
Australian Gas Light
The pipeline project needs between 100 and 150 petajoules a year of gas demand to proceed. So far it has signed up three customers, TXU, Australian Gas Light Co. and CS Energy who have agreed to buy a total of between 75 and 100 petajoules.
Rio Tinto Group's Comalco Ltd. unit said it also has held talks about buying gas from Exxon Mobil for a $750 million alumina plant it's building at Gladstone in Queensland state. ``We've been talking with PNG gas over a few years,'' Jim Singer, a spokesman for Comalco said Friday. ``There's no agreement that's been signed.''
Comalco may need about 16 petajoules of gas a year for the first stage of its project, increasing to about 30 petajoules in the second, Andrew Blakely, energy analyst at J.P. Morgan Securities Australia Ltd. said in a report. Queensland Alumina Ltd., crop protection chemical maker Incitec Ltd. and Queensland state government-owned power generator Stanwell Corp. may also take gas from the project, he said.
Blakely said he's now ``very optimistic'' the project will proceed to the $60 million initial engineering design phase, giving it up to 12 months more to find the additional volumes it needs to go ahead fully.
``We believe there are sufficient potential contract volumes available to ramp up production too reach a plateau for sale of 200 petajoules a year by year 10,'' said Blakely, who has upgraded his recommendation on Oil Search stock to `overweight' from 'neutral'.
Exxon Mobil owns 38.9 percent of the project and is the operator. ChevronTexaco Corp., the second-biggest U.S. oil company, owns 9.7 percent, Japan (PNG) Petroleum 3.4 percent, and MRDC, which represents Papua New Guinea landowners, 3 percent.
OSH Price at posting:
0.0¢ Sentiment: ST Buy Disclosure: Held
