French Company Agrees To Invest $3.6 Billion In PNG’s LNG

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Total SA to buy stake in InterOil’s gas assts in Gulf Province

PORT MORESBY, Papua New Guinea (The National, Dec. 9, 2013) – France’s Total SA has agreed to buy a stake in InterOil’s assets in Gulf for K8.7 billion (US$3.6 billion) to build a liquefied natural gas (LNG) project.

This will be Papua New Guinea’s second LNG project, with the first ExxonMobil-led project about to complete construction and set to produce first gas by the end of 2014.

InterOil will sell Total a gross 61.3% interest in petroleum retention lease 15 (PRL15), which contains two fields at Elk and Antelope in the Gulf hinterland.

Total will have exclusive rights to negotiate a farm-in to all InterOil’s exploration licences in the country.

The two companies have agreed to a final transaction price of US$1.5-US$3.6 billion for 5.4-9 tcf of natural gas equivalent. Payments will be based on appraisal drilling and reserves certification.

Agreements covering the purchase of PRL15 interests, the proposed LNG project and exploration farm-in rights were signed in Port Moresby last Friday by Hession, and Total Asia-Pacific exploration and production senior vice-president Jean-Marie Guillermou.

Fixed payments to InterOil are made up of US$613 million on completion of the transaction expected during first-quarter 2014; US$112 million on the occurrence of a final investment decision for a new LNG plant; and $100 million at first LNG cargo from the facility.

Total also agreed to pay US$100 million/tcfe for volumes more than 1 tcfe for additional resources discovered within the retention lease from one exploration well. Payment would be made at its first gas from the proposed Elk-Antelope LNG facility.

In addition Total will carry the cost of drilling the appraisal well program and lead construction and operation of the proposed LNG project.

InterOil will continue to operate all its exploration leases in the country.

InterOil will use funds from the transaction to retire debt, exploration and appraisal activities, and to fund the company’s 30% share of the Elk-Antelope project development.

InterOil chief executive Dr Michael Hession said last Friday that the first jobs associated with the Elk and Antelope gas fields will start before Christmas.

Hession said: "Papua New Guinea is now a multi mega LNG site; we will work alongside Total to develop further expertise among Papua

New Guineans in the country’s oil and gas industry.

"We (InterOil) will also start employing people before Christmas and will deliver on time in a way PNG will be proud of."

Hession said the transaction was a key to meeting the company’s priority objectives of maximising shareholder value, monetising Elk-Antelope, progressing development of an integrated LNG project, strengthening its financial position and continuing its extensive programme.

Guillermou said Total is enthusiastic in delivering the country’s second LNG project on time and within budget.

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