Former BG Group (OTCQX:BRGYY, OTCPK:BRGXF) CEO Chris Finlayson has been named Interoil's (NYSE:IOC) chairman as the company develops one of the largest natural gas fields to be discovered in Asia in recent years.
InterOil is planning on building an LNG plant in the Gulf of Papua, which will use supply from the Elk and Antelope gas fields as feedstock. Elk and Antelope were discovered in 2006 and 2009, and are estimated to contain as much as 7T cf of gas.
Finlayson says he's excited at the prospect of working on one of the largest gas finds in recent years. "It’s a world-class field with extremely competitive development costs that is ... very close to the main Asian markets. The proposed project will target customers in China and Japan as the U.S. adds to supply competition in the global LNG market."
InterOil’s project gained important backing this past March when Total (NYSE:TOT), agreed to acquire a 40.1% holding in the Elk-Antelope gas field. It is expected that Total will operate the LNG plant.
InterOil (IOC) will sell its Papua New Guinea oil refinery and petroleum products distribution business to Puma Energy for $526M, in order to put a greater focus on its natural gas business.
"Our upstream and LNG business has become core to the company's growth and, as a result of the success we have had in discovering and monetizing gas, the time is right to focus on this part of our business," says InterOil COO Jon Ozturgut.
IOC and TOT want to use supplies from Elk and Antelope to develop the country's second liquefied natural gas development; Exxon's $19B PNG LNG project started shipments last month, and seven more gas export plants are being built in neighboring Australia to tap Asian energy demand.
Hession also believes IOC will resolve a dispute with Oil Search (OISHF), which agreed earlier this year to acquire part of the Elk-Antelope venture; Oil Search has said IOC’s deal with TOT breached its pre-emptive rights.
Oil Search (OISHF) is contesting Total’s (TOT) agreement earlier this week to acquire a 40% stake in InterOil’s (IOC) natural gas discoveries in Papua New Guinea, a dispute which could require international arbitration to be resolved.
The dispute surrounds stakes in the Elk and Antelope fields, coveted because the gas could be used either for a possible expansion of a $19B liquefied natural gas project that ExxonMobil (XOM) is building with Oil Search, or for a rival project.
Analysts say the outcome of the dispute is unclear, but some speculate Oil Search's aim may be to keep the door open to XOM to enter the Elk-Antelope joint venture.
Meanwhile, IOC has spudded its third well in as many weeks in Papua New Guinea with up to five more planned over the next year or so.
Oil Search says it will use the funds to buy a 22.8% stake in a license that includes the Elk and Antelope gas fields from closely held Pac LNG Group for US$900M; the fields are being developed by Total (TOT) and InterOil (IOC).
Oil Search will issue 149.4M new shares at A$8.20 each to the government of Papua New Guinea to fund its entry into the Elk and Antelope developments.
The deal brings Oil Search inside both major energy joint ventures in the country, led by Exxon Mobil's (XOM) $19B PNG LNG project, where Oil Search owns a 29% stake.
Teck Resources (TCK) is said to be lining up a $4B-plus cash offer, with advisor BAML after reaching agreement with IOC’s 19.8% shareholder Chandler Corp. and holding several meetings with IOC management about transacting a friendly deal.
Shell (RDS.A, RDS.B) also is mentioned as a potential bidder; it would have plenty of cash after the sale of its Italian retail business to Kuwait Petroleum and if it disposes of its 23% (£3.95B) stake in Australia's Woodside Petroleum.
In related news, Reuters reports the country has decided to raise A$1.68B to pay off a bond it issued to Abu Dhabi in 2009 instead of giving up a strategic stake in oil and gas producer Oil Search (OISHF, OISHY).
Royal Dutch Shell (RDS.A, RDS.B), Total (TOT) and Woodside are said to be eyeing a possible stake in Oil Search, which owns a 29% stake in the $19B PNG liquefied natural gas project.