InterOil selects Total for multi-billion PNG gas deal

INTEROIL has struck a joint venture deal worth up to $US3.6 billion ($A4 billion) with French super major Total for the development of its gas reserves in Papua New Guinea.

Following long drawn-out commercialisation talks, InterOil has agreed to sell Total a gross 61.3% interest in petroleum retention licence 15, which contains the Elk-Antelope gas fields in the Gulf Province of PNG.

The deal also grants Total an exclusive right to negotiate a farm-in to all InterOil's exploration licences in PNG.

InterOil said it was a "transformational transaction to monetise InterOil's Elk-Antelope fields" while allowing the company to maintain a material 30% interest in the integrated LNG development.

A final transaction price of $1.5-3.6 billion has been agreed for between 5.4 trillion cubic feet equivalent and 9Tcfe of hydrocarbon gas, with payments to be based on appraisal drilling and certification.

Agreements covering the sale and purchase of the PRL 15 interests, the proposed LNG project and exploration farm-in rights were signed in Port Moresby today by InterOil chief executive Dr Michael Hession and Total Asia Pacific exploration and production senior vice president Jean-Marie Guillermou.

Fixed payments to InterOil include $613 million on transaction completion, which is expected in the first quarter of 2014; $112 million on a final investment decision for a new LNG plant; and $100 million at first LNG cargo from the proposed LNG facility.

Total also agreed to make a payment of $100 million per trillion cubic feet equivalent for volumes of more than 1Tcfe for additional resources discovered in PRL15 from one exploration well, with payment to be made at first gas from the proposed Elk-Antelope LNG facility.

The company will also carry the cost of the drilling for the appraisal well program and lead construction and operation of the proposed integrated LNG project.

Total also has an option to take an interest in all of InterOil's exploration leases in PNG, which InterOil will continue to operate.

InterOil noted today's agreement followed an extensive international competitive bidding and evaluation process for development of the company's interests in PNG.

Hession said the transformational company-making transaction would significantly benefit InterOil shareholders and PNG people.

"It is satisfying that Total, one of the world's largest international oil and gas companies, shares our faith in developing Elk-Antelope, a world-class hydrocarbon resource and one of the largest discoveries in Asia in the past 20 years," he said.

"Total is a world-class operator and will bring experience and expertise to a development that will diversify Papua New Guinea's hydrocarbon sector.

"InterOil, with more than 1000 employees, is already a significant contributor to Papua New Guinea's economy and we remain confident that this deal will lead to continued investment, increased government revenue and job creation, particularly in the Gulf Province.

"We will work alongside Total to help develop further expertise among Papua New Guineans in the country's oil and gas industry.

"We will also work with the Papua New Guinea government to develop proposals for setting aside gas for generation of affordable electricity throughout Papua New Guinea.

"This is a great day for InterOil's investors, Papua New Guinea and the people who work for us."

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 exploration program.

Funds from the transaction will be applied to retiring debt, exploring and appraising activities and to funding InterOil's share of the Elk-Antelope development.

InterOil chairman Dr Gaylen Byker said today's transaction was a landmark for investors, who had stuck by the company since its formation in 1997.

"This is a significant event in the company's history and we look forward to growing this company along with Total for the benefit of our shareholders and for Papua New Guinea," he added.

Meanwhile, Singapore Tapis crude closed at $US121.33 a barrel overnight, from $118.19 last Friday.

London Metal Exchange cash copper closed at $7064.75 a tonne overnight, a difference of just 0.15% from the price of $7054 at the end of last week.

LME spot nickel's overnight price was $13,692/t, up 1.79% from last week's price of $13,451.

Spot gold was trading at about $1226 an ounce during the past 30 minutes, down 2.14% from last Friday's $1253.


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