I found this article yesterday www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/7677911), I was hoping for someones opinion?
Papua New Guinea sets 180-day trigger to terminate InterOil LNG deal Sydney (Platts)--1Jun2012/158 am EDT/558 GMT
Tensions between InterOil and the Papua New Guinea government over the US-listed company's plans for its Gulf LNG development have escalated, with Minister for Petroleum and Energy William Duma setting a 180-day trigger for termination of their 2009 project agreement.
In a statement Thursday, Duma said InterOil's project vehicle Liquid Niugini Gas Limited and the state must now meet to discuss their respective rights and obligations within the agreement.
The PNG government put InterOil on notice in May that it planned to cancel the project agreement, after repeatedly issuing public statements that the company's proposal for the Gulf LNG project had been rejected by the National Executive Council, or cabinet.
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The agreement calls for the delivery of a 7.6 million-10.2 million mt/year LNG project based on InterOil's Elk and Antelope gas reserves, using internationally recognized technology and operators with experience at similar-sized assets. Instead, the company has proposed a phased development and does not have a recognized operator on board.
Duma said the PNG government has worked with InterOil with a view to ensuring that Elk/Antelope was monetized in a manner consistent with the high standard set by the nation's foundation project, the $15.7 billion PNG LNG plant currently being constructed by ExxonMobil.
"InterOil has for too long insisted on a development structure, which is designed to only meet its objectives of controlling the asset and the pace of developing it," Duma said. "This has led to a proposal calling for a piecemeal, incremental and fractured development implementation operated by InterOil and its affiliates, rather than by large-scale international operators with experience and capital."
As the project plans currently stand, InterOil would act as the upstream field operator. In August 2010, InterOil and Japan's Mitsui agreed to develop a $550 million liquids stripping project at the Elk and Antelope fields that would be a precursor to the LNG development.
In February 2011, InterOil signed an agreement with Australia-based Energy World Corporation for a modular LNG plant to be developed in the Gulf province in two phases, the first of 2 million mt/year, with a later expansion of 1 million mt/year. The agreement provided for a possible expansion up to 8 million mt/year.
InterOil has also previously struck a deal with South Korea's Samsung Heavy Industries and Norway's FLEX LNG for the construction and operation of a 2 million mt/year fixed floating LNG project to be integrated with the EWC plant, although that proposal has now lapsed.
The project agreement stipulates that a final investment decision should be reached on the LNG facility by June 2013.
"We have on numerous occasions made it clear to InterOil and its affiliates that their persistence in pursuing project solutions relying on Flex LNG's fixed-floating and Energy World Corporation's modular arrangements will put them on a path to repudiatory breach of the 2009 project agreement," Duma said. The minister also ruled out any suggestion that the project agreement would be renegotiated.
Duma called for the immediate sale by InterOil of a minimum 50.5% stake in Elk/Antelope to a major international petroleum company with experience operating LNG plants of around 7.6 million mt/year capacity. He added that the upstream activities in the fields must be operated by the international company, not by InterOil or its affiliates.
The minister's statement follows a May 21 letter written by Liquid Niugini Gas Director Christian Vinson to Department of Petroleum and Energy Secretary Rendle Rimua, which claims the government's notice of intent to terminate the project agreement is invalid. Vinson said that to terminate the agreement, the state must establish that the company has failed to take certain steps, rather than expressing an opinion as to its intentions not to do something.
He said the company's obligations under the project agreement did not commence in full force until the satisfaction of all the conditions precedent. Vinson added that Liquid Niugini Gas had been using its reasonable endeavors to pursue satisfaction of those conditions and was proceeding in good faith to find an "LNG operator" pursuant to the project agreement.
Liquid Niugini Gas "invited" the department to withdraw its termination notice in writing by the close of business on June 1, or it might take legal action against the state. InterOil executives did not respond to Platts' inquiries Friday.
Earlier this week, PNG media reported that US major Chevron was interested in partnering InterOil in the LNG project. A Chevron spokesman declined to comment on the reports.
Duma has repeatedly pointed to Shell as a potential partner for the development. Shell signed a strategic alliance with state-owned Petromin last August and is actively pursuing LNG opportunities through a Port Moresby office opened in February this year.
"I am gratified by the tide of interest in investing in large-scale projects in the petroleum sector in Papua New Guinea that has resulted from the establishment of the PNG LNG project," Duma said Thursday. "Just recently, our Prime Minister [Peter O'Neill] and I together had the pleasure of welcoming Royal Dutch Shell, perhaps the world's largest LNG company, back into the country."
PNG has been in the grip of a constitutional crisis since August 2011, when O'Neill took the helm after a power struggle with incumbent prime minister Michael Somare. General elections are scheduled to be held in the impoverished but resource-rich nation in June.
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