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PORT MORESBY, Papua New Guinea (November 30, 2000 - Post-Courier/PINA Nius Online)---The company setting up a Port Moresby oil refinery has made a buy-in to an oil field in the highly prospective Timor Sea area.

InterOil Corporation announced that it had signed a contract to purchase a 50 percent interest in production for the Buffalo oil field from BHP Petroleum (North West Shelf) Pty. Ltd. for AUS$ 40 million (US$ 20,849,920).

Industry sources said the InterOil move was a clever strategic move.

The favorable purchase price and the possibility of more oil reserves being discovered in the licensed area would give InterOil positive cash flows at a time when the company is involved in a big spending program to build its PNG refinery.

InterOil is focused on Papua New Guinea and the surrounding region, developing an integrated oil business consisting initially of an oil refinery and petroleum exploration.

The refinery is being constructed across the harbor from Port Moresby, and will process 32,500 barrels a day of crude oil. The resulting fuel products will be sufficient to supply the PNG domestic market, leaving 45 percent of the volume available for export.

InterOil is the second largest holder of exploration acreage in PNG.

The Buffalo field was reported in APPEA’s publication Flowline as being the fourth biggest producing field in Australia during the first half of this year. It is located 560 kilometers (336 miles) northwest of Darwin in the Timor Sea outside the zone of cooperation with East Timor in an area administered by the government of Western Australia.

InterOil believes, based on independent studies, that it might be possible to improve reserves and production by drilling more development wells. The facilities consist of a wellhead platform and a floating production storage and offtake vessel leased from Modee, a subsidiary of Mitsui.

InterOil chairman and CEO Phil Mulacek said:

"The acquisition of the Buffalo oil field will be funded from existing cash reserves and generates immediate cash flow for InterOil two years earlier than anticipated by our shareholders.

"It also provides a lower risk implementation of our strategy to move into upstream production and create a fully integrated oil company. Construction of the refinery is proceeding, with the site now cleared and earthworks undertaken."

For additional reports from The Post-Courier, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The Post-Courier (Papua New Guinea).

Pacific Islands News Association (PINA) Website: 

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