The broadbrush plan, which could take years to gel, calls for an investment of around $US3.5 billion ($A2.2 billion), earning it the status of PNG’s biggest-ever development.
Naturally, PNG Prime Minister Sir Michael Somare likes it and wants to see LNG become synonymous with PNG as quickly as possible.
But it was in welcoming InterOil’s bold talk that Slugcatcher spotted a few interesting variations on how news can affect different people.
The politician in Sir Michael, honed by three decades of leadership in his country, could not resist a back-hander for the oil majors that have promised much and delivered little to PNG.
“We can’t allow super-majors to leave us on the backburner,” was one of his observations about the Elk discovery and InterOil’s LNG plan.
No names were mentioned but there seems little doubt that Sir Michael had ExxonMobil squarely in his sights because it has been the super-major most uncertain about whether to build PNG’s other great hydrocarbon project, the pipeline across to Australia.
It was while “connecting the dots” leading from Elk, to the PNG gas pipeline, to other LNG proposals, that a common thread started to become obvious – a thread called profit/loss.
It looks as if the hard-nosed chaps at ExxonMobil really are running a very demanding spread sheet across all future big ticket investment projects.
A couple of weeks ago The Slug speculated, and no one denied, that the Gorgon LNG project in Australia’s northwest was all but dead in the water because of soaring costs, failure to win whole-hearted government support, failure to jump through increasingly arduous environmental hoops – and failure to convince ExxonMobil that the project could be profitable.
Now we see Sir Michael nailing ExxonMobil’s colours to the wall over the failure to get the PNG pipeline up with his barbed comment about being left on the backburner.
Where does this leave everyone? Well, it seems that if Gorgon really is dead, and if LNG in PNG really is a viable option thanks to Elk, then a bit of “deck shuffling” might be in order.
For starters, it is possible that we could soon see a re-focus from Oil Search, the pipeline leader for a decade or so, back towards one of its other plans – an LNG option.
The combination of Oil Search’s gas entitlement with the new field discovered by InterOil could be just the trick to get an LNG development off the ground, given that customers (and banks) are demanding to see very large reserves to underpin investment.
But – and this really is the big BUT in everything that happens from here – it’s the potential for future profit that will dictate events.
ExxonMobil is running scared from the damage being done to its profit projections from the effects of rising construction costs and sliding oil prices – and so should everyone else.
Love ’em, or hate ’em, the boys at ExxonMobil know exactly how many bucks they’ll make from an investment – it’s called business.
That’s why a combination of Elk and the gas held by ExxonMobil, Oil Search and others in the highlands of PNG becomes such a fascinating recipe.
The big winner from such a move would be PNG and that’s why Sir Michael will be bending over backward to encourage the LNG option.
The big loser is the PNG pipeline, which like Gorgon, appears to have fallen victim to ExxonMobil’s tough approach to costs and profits.
Note: The views of Slugcatcher are not those of APPEA.
