The PNG Government indeed owns about a 10% stake in OSH. However, the PNG Government also owns a 16.57% stake in the PNG LNG project through the National Petroleum Company of PNG, plus a small stake through Eda Oil (not counting a small stake it holds for landowners through the Mineral Resources Development Corporation). So, if PRL15 were developed for integration in the PNG LNG project, it stands to benefit in any case, I would think.
Peter O'Neill, the PNG Prime Minister backed the Oil Search proposal as "Cooperation between our two large LNG projects...is in the best interests of our nation. These arrangements present a pathway to collaboration and possible integration of the projects..."
I think it's also important, when talking about Governments, to consider the political and economic pressures they face:
* PNG's Government faces a no-confidence vote in Parliament tomorrow, after the Minister for Petroleum and Energy last week defected to the Opposition - I'm not sure their focus is on this transaction at the moment, given that they're trying to secure their political survival. Come tomorrow, there could well be a new Prime Minister or a new Government. If not, public unrest is likely to increase further. It has been on the rise (students, pilots, doctors).
* PNG's economy is in trouble, and it's government finances are in trouble. I imagine that the Government has much to gain from any transaction which is likely to bring investment forward. Although the gas wouldn't start flowing for many years, a major new development can boost the economy, as did the PNG LNG project.
I still think that Exxon's bid will be successful, and that the new gas will be integrated into the PNG LNG project. The Government and Oil Search both stand to benefit in any case. Total will have a nice piece of the pie, but may be convinced to sell out to either Exxon or Oil Search in due course, but in my opinion unlikely this year...
We'll know more later today, it seems!
OSH Price at posting:
$7.33 Sentiment: Buy Disclosure: Held
