The complex business of PNG LNG market

By: Andrew A Arthur

After 200 shipments of LNG from Papua New Guinea and still we have not seen an profit nor have we seen any developments in Papua New Guinea!

This just one of the many comments by frustrated landowners and citizens in Papua New Guinea about the commercial viability of the PNG LNG.

Recent protests by landowners of Portion 152 for unpaid royalties also aired the same sentiments.

But why is there a delay on any inflows into the Government coffers and into the Government operating accounts to fund the national budget??

There are many answers to that but the root cause is how the agreement was structured and who gets what percentage and how did they fund their share percentages.

See below the share structure of the PNG LNG agreement;

  • Exxon Mobil (US) 33.201%
  • Oil Search (Aus) 29.003%
  • Santos (Aus) 13.532%
  • Nippon Oil Exploration (Japan) 4.680%
  • PNG Govt (NPC + Petromin) 16.779%
  • Landowner 2.805% 

Inorder to take up shares in the PNG LNG, you need to fund your percentage in those shares. PNG Government had to take an IPIC loan of over $1billion to fund its shares. All other parties would have done the same and taken out loans.

When the gas are sold, the parties start repaying their debt, these would equate to at least 3-7 years of loan repayments until they start to earn a profit from the sale of the gas.

It is estimated that by 2017, Papua New Guinea Government would be turning some profit in the 2nd quarter of the year when major loan repayments are done.

Papua New Guinea is on track to seeing huge profits from the sale of its LNG….

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Japan is major LNG buyer
By: Post Courier -1st March 2017
JAPAN is the largest buyer of liquefied natural gas in the region and is ready to share its experience of LNG and expand into the Asia-Pacific LNG market.
Yuki Sadamitsu from the Japanese Ministry of Economy, Trade and Industry, said Japan remains the largest buyer of LNG in the rapidly growing LNG market in Asia.
Mr Sadamitsu made these remarks in his keynote address yesterday at the Petroleum and Energy Summit at the Stanley Hotel in Port Moresby.


“Japan remains to be a large buyer of LNG for the foreseeable future.
“LNG demands will be larger than the government estimate.
“Japan is ready to collaborate with global, especially Asia-Pacific partners to develop and expand the LNG market.
“This of course, includes cooperation between the energy producing and the consuming countries,” he said.
Japan is a consumer of mixed energy sources such as fossil fuel, oil, coal, LNG and others and is looking at reforming its energy market.
“Japanese LNG market is under drastic reform of liberalisation,” Mr Sadamitsu added.

As part of Japan’s strategy for LNG market development, they are looking at three pillars which are tradability, infrastructure, and price discovery including market expansion to move forward.
“If you look globally, Asia is the most rapidly growing LNG market.
“Asia LNG import will almost double by 2030.
“We, the Japanese government and companies are ready to cooperate with Asian countries to share know-how of LNG and expand the Asia-Pacific LNG market.
“We will work on the LNG strategy for Asian countries this year,” Mr Sadamitsu said.

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Court approves ExxonMobil buyout of InterOil’s assets in Elk-Antelope gas fields

BY: Cedric Patjole – 15:00, February 21, 2017

ExxonMobil will by the end of this week takeover InterOil after the commercial arrangement between the two companies, worth more than K6 billion, was approved yesterday.

ExxonMobil will now own InterOil’s assets in the undeveloped Elk-Antelope gas fields, in the Gulf Province, and exploration licenses covering about 16,000sqkm.

In a statement today, InterOil announced that the Supreme Court of Yukon in Canada, granted a final order approving the arrangement between InterOil and ExxonMobil.

In November 2016 the Yukon Supreme Court had initially upheld an appeal by InterOil founder, Phil Mulacek, against an original takeover offer.

Last week InterOil shareholders overwhelmingly approved a revised transaction agreement with Exxon Mobil with more than 91 per cent of  votes cast in favour.

Previously 80 per cent of shareholders voted to approve the original transaction  at a Special Meeting on September 21, 2016.

21cpinteroil

According to the amended agreement Exxon Mobil lifted the maximum price payable for InterOil by about 10 per cent to US$78.94 (K236) per share.

The offer was structured as a US$45 (K135) per share flat cash payment, plus an extra US$7.07 (K21) per share for each trillion cubic feet (tcf) of gas certified as being held in Elk-Antelope.

Under the approved arrangement, ExxonMobil now becomes a Joint Venture in the Papua LNG Project, operated by Total SA, and the PNG Government, with expected first gas in the early 2020s.

The Papua LNG will be supported by the Elk-Antelope gas field, located in the Eastern Papuan Basin.

ExxonMobil now has a commanding position in the basin with a record of five successful discoveries originally by InterOil – Triceratops, Elk, Antelope, Raptor and Bobcat.

This afternoon, an ExxonMobil spokesperson informed Loop PNG that “the acquisition of InterOil as envisioned in the amended agreement continues to represent a significant value to the government and people of Papua New Guinea, as well as to InterOil shareholders.  ExxonMobil looks forward to closing the transaction in accordance with the Plan of Arrangement.”

Pictures credit: http://www.offshorepost.com/

Papua New Guinea seeks higher tax take for ExxonMobil gas expansion

12/05/2016 – By: Exxon Staff

Papua New Guinea is preparing to negotiate new fiscal terms for a US$10 billion expansion of ExxonMobil’s liquefied natural gas (LNG) project in the Pacific nation in a push to boost revenue, PNG Treasurer Patrick Pruaitch said on Sunday.

The bid comes amid rising concern among rural landowners that they have yet to see the full benefits of the US$19 billion PNG LNG project after more than two years of operation.

ExxonMobil now wants to add a third production unit.

PNG has been hit hard by a slump in oil and gas prices and a drought which crippled farming and brought production to a halt at its largest copper mine to a standstill.

Key Speakers At 21st World Petroleum Congress

“Current metal and oil prices do not support what we are doing,” Pruaitch told Reuters in an interview ahead of a conference in Sydney where the government is looking to drum up investment in the mining and energy sectors.

“Our message is that we have a sufficient pipeline of projects…The time to do the hard yards is now,” he said.

Two multibillion dollar copper and gold projects, Wafi Golpu owned by Newcrest Mining and Harmony Gold, and Frieda River owned by Guangdong Rising Assets Management, are awaiting the government’s green light by mid-2017.

The government has more than halved its forecast for GDP growth this year to 2 percent. For next year it sees growth picking up to 2.8 percent, based on higher copper and oil prices.

To boost revenue, the government wants to raise US$640 million by selling a 4.27 percent stake in the PNG LNG project to landowners, but a deal has been stalled by disputes over landowners’ entitlements.

“I’m desperate to ensure that every available revenue that I can use to fund this year’s budget I will put my hands on, including the proceeds of the sale of 4.27 (percent),” Pruaitch said.

PNG recently lined up a US$500 million loan from Credit Suisse, after putting on hold plans to raise US$1 billion with a sovereign bond issue, due to market volatility. Pruaitch said the government still wants to pursue a bond issue in 2017, but it was more likely to be for US$500 million.

With dwindling revenue from mining, the government was counting on LNG — with contract prices tied to oil — to return the budget to surplus by 2020. Yet with a slump in oil prices, it now expects deficits to persist for at least another five years.

Pruaitch said the government aims to reach a deal with ExxonMobil over new tax terms for expansion of the PNG LNG project in 2017, to ensure it goes ahead in time for an expected upturn in the LNG market early in the next decade.

It is important to negotiate better terms for the country on what is expected to be a $10 billion project, he said…

http://www.onepng.com/2016/12/papua-new-guinea-seeks-higher-tax-take.html

Kroton Option Exercise by Interested Beneficiary Groups

January 06,2017, 06:46 pm

The Managing Director of Kumul Petroleum Holdings Limited (KPHL), Mr Wapu Sonk today announced that the Company has been working with beneficiary groups that have expressed their interest to exercise the Kroton Option Equity.

These groups will be called in over the coming weeks to sign up on the share transfer documents as well as the vendor note being offered by KPHL.

18_kumul_petroleum

The following beneficiary groups have come forward;

(1) PNG LNG Plantsite

(2) PNG LNG Pipeline

(3) PDL 9 – Juha

(4) PDL 4 – Gobe and,

(5) Fly River Provincial Government.

The option to acquire shares in Kumul Petroleum (Kroton No 2) Holdings Limited is one of the benefits agreed to by the PNG Government and set out in the Umbrella Benefits Sharing Agreement (UBSA) in 2009 for landowners and Provincial Governments along the footprint of the PNGLNG Project.

Under the UBSA the PNG Government granted the landowners and Provincial Governments a commercial option to buy 25.75% of the shares in Kroton No 2 Limited, the special purpose company that holds the State’s 16.57% interest in the PNG LNG Project.

In addition to the beneficiary groups who have registered interest to sign up in the coming weeks, one landowner beneficiary group and four provincial governments have already taken up their Options. They are PDL 5 (Moran); and Southern Highlands, Hela, Gulf and Central provincial governments.

Mr Sonk said; “The Beneficiary Groups who have expressed their intention before the 31st of December 2016 to exercise the Kroton Option using KPHL’s Vendor Finance Facility are hereby advised that signing of the share transfer documents and the Vendor Finance Facility is scheduled in the coming weeks until the 31st of January 2017.”

He pointed out that KPHL’s role was to implement the agreement that was reached in the UBSA and, provide additional benefits for the Landowners and relevant Provincial Governments if they elect to invest in Kroton.

KPHL will work with those beneficiary groups that have signed up to complete the transaction and arrange necessary governance aspects of the interest holdings in Kumul Petroleum (Kroton No 2) Holdings Limited.

http://www.postcourier.com.pg/News/kroton-option-exercise-by-interested-beneficiary-groups/#.WHMwrVN96Ul