gulf lng project

Below some comments, posted overnight on the shareholdersunite webpage, which provide a provide plausable background information as to the most recent activities re:Governor of Gulf Province (Kavo) initiatives:

"I've had at least a few conversations in the last week on differences between IOC and a XOM in their obligations to host nation PNG. No excuses, just reality. Somare Gov't/PNG LNG approval was rushed prior to completion of envirionmental and social mapping. This mapping defines which, how and when landowners are compensated and who, when and how the project is clean up after it's production life. Landowner problems exacerbated as a result. Important stuff and IOC is/has gone through this this tedious process as required.
Also, SM's typically operate only to define, build facilities and extract resources while meeting minimal imposed social responsibility requirements. XOM's 1st choice was a sub sea pipelint from PNG to AU where the plants would be built. Talk about exploitation.
In IOC's case, there is a nation building element in play which is easy to overlook. IOC is an imbedded member of PNG fabric. Gulf LNG is the centerpiece of Gulf Province development and the location is without infrastructure, and greater public infrastructure is needed and planned. Cooperation between Gulf LNG and PNG is needed and responsibilities need to be defined as who, when and how the greater infrastructure beyond the project needs is designed, built, paid for, reimbursed and maintained. Since a complete city needs to be built with schools, hospitals, utilities, entertainment, housing, hotel, restaurants, airfield, roads, support facilities and services, harbor, pier use and all the other unimaginable details, all these details need to be pre-determined. IOC knew this going into the Gulf and those early Gulf development MOUs with Energy World, Koreans, Mitsui and Gulf Gov. Kavo set the table for IOC/PNG cooperation beyond the project. Gulf LNG will be the hub and all services and development beyond will go through it. IOC will benefit as IOC controls the retail/wholesale energy market and on island sales will boom. The Chinese loan and PNG's emphasis on infrastructure spending could well mean that PNG will be spending billions on infrastructure, much in Gulf and into Highlands, rather than funding their share of 4Mtpa train, choosing to invest in subsequent modules. The 50% PNG ownership article may refer to a PNG larger stake in modules #3 and #4 and a larger IOC stake in module#1. We won't know, but this is how much of what we know can be explained."

My above post last week, was sparked by a Petrovale thread. EWC has been confirmed to be out of the initial 4Mtpa facility. If true, how does that affect the relationship between Kavo/EWI, parent of EWC? Similarily, what if Mitsui or JKM consortium is not winning bidder? Could financial comittments to Gulf Province beyond what is required in Gulf LNG alone result in a lower bid by JKM for Gulf LNG stake when compared to a SM with no extra regional obligation? How does that affect the Kavo/Mitsui/Korean MOU's for petro-park and development surrounding the Gulf LNG Project?
If Kavo has hard-lined, privately as he did publicly, that Gulf resources are to be produced in Gulf Province it appears he has clout as Duma and O'Neill, and presumably NEC, have agreed to the project location shift from NapNap. I would bet Kavo has been equally adament still, that his province receives the support from Mitsui (JP) and SK and EWI via EWC's standing in the LNG project. To placate Kavo, would similar obligations be incumbent on all bidders or is there to be a spot for EWC in the project, possibly in expansion, T-w or power plant build outs? There is likely some truth to the theory that 'NEC is dragging PA approval due to bribes required and IOC will not pay bribes' so here we are at loggerheads. The difference is likely these 'bribes' are for public benefit in infratrusture commitments, rather than payola to enrich a PNG fat-cat politician. Such bribes could be buried in construction and engineering costs and projects.
A few recent developments like Kavo ordering equipment for new construction entity (Would Kavo do that if issues hadn't been hammered out?) and the DMO gas agreements being negotiated and mentioned in an article yesterday shed light of negotiations with Kavo and PNG/NEC also :
..."They want to know why the PNG government did not insist that as part of the PNG Gas Agreement, adequate supplies of gas were not made available to domestic users, particularly for power generation.

The understanding is that in negotiating the deal with ExxonMobil and its partners, the former government felt it should not impose too many restrictions on development of PNG’s first LNG project and that the revenue stream, through taxes and other means, would be much more useful in the short to medium term.

Domestic gas supplies could be sought from future projects, it believed."...
With top IOC management on island since early last week pounding out a final deal and reports from IOC management that 'major progress has been made' it appears some of the matters greater than a CSP and LNG proect are addressed. That likely plays into last week's WSJ article which allows an offer by IOC extended to PNG to take up to 50% of whatever part of the project is in question. It could be E/A 4 Tcf, the 2nd 4 Mtpa module and associated expanded CSP. If Gov't takes a large bite of upstream and the expansion modules, they would be in the position of building out infrastructure as power plants, , power lines, roads, pipelines and such, with Chinese loan $ for the next few years, and selling a chunk of their large share in 2nd modules to fund their obligations in the expansion.
Someone reported that Phil was "not leaving PNG until it was done" and it is looking like he will be able to go home pretty soon.




RE: Kavo Watch
Treedaddy, I started down that path last evening about Mitsui, the importance of the CSPs, the government leaked as having an option for a 2nd "smaller" LNG project (could be FLNG, could be EWC modular or Mitsui sub/Chart modular) and the idea of a smaller power plant that is NG fueled but big enough to energize the capital city of Kerema, etc. With the project (as of now) set to be at Bluff which is near Kerema this scenario makes a bit of sense. One thing EWC/EWI has done elsewhere is small-scale power plants and they are now working fast and furious on the Philippine project. With the government needing low cost projects and now being more serious about designating gas from projects to be available for domestic use where it makes sense, they may have come full circle to say let's look at the option for ourselves down the road. Again, if they control CSPs as part of the upstream, they control 2 very important parts of source with plenty of options. Mitsui remember extended their agreement with IOC for CSP units through Dec 31, 2012 even though they are part of the JKM consortium. Velly smart by them to say, "Hey, we were part of this from the start on the CSP side and if JKM is chosen, we are stronger, but we don't necessarily want to throw away the CSP piece."

This whole thing has as many or more moving parts as ever, especially since the government is on board and wanting to assure the nation of access to NG/LNG. There are many things to consider before NEC can pull the trigger when it involves so many important considerations for the developing the country. Kerema is an important link to the HIghlands and there has been a strong desire to connect Port Moresby with Kerema and the Highlands. That coast has been discussed quite often as a great area for recreation/vacations as it is protected and very beautiful. Kavo has been to Fiji several times talking to resort developers there to come to Gulf. Kerema has been the point of discussion for the petroleum park and being developed as both an industrial port as well as leisure/resort area and part of the link to the Highlands. Maybe the government has gotten to looking at Tusker's big picture and saying here's our chance. Good progress being made statements mean light bulbs are coming on; maybe more literally than figuratively.




RE: Kavo Watch
"Someone reported that Phil was "not leaving PNG until it was done" and it is looking like he will be able to go home pretty soon."

Treedaddy, Nov 12th or so I believe will be O'Neill's 100th day in office. I believe he was sworn in on Aug 4th. Could be there is expectation of a Kodak moment which can be celebrated with a mention in that speech. MS mentioned that this speech was coming in early Nov. He may be putting the finishing touches on that speech now.