Total nets Papua New Guinea gas field prize
The company has bought into InterOil's LNG fields
Total is expanding its footprint in Papua New Guinea (PNG) after buying into InterOil's prized Elk and Antelope fields, expected to be developed as a liquefied natural gas (LNG) export scheme in the emerging gas province.
The junior explorer is selling a 61% stake in its PRL15 licence to Total in a deal valued between $1.5-3.6 billion based on the appraised gas resource.
The final price will be dependent on the recoverable gas resource and is based on a range of 5.4 trillion to 9 trillion cubic feet (cf).
Total expects to farm down a further 19% of the stake, retaining a 42% interest in the project. Its share will shrink further when a petroleum development license is issued, as the PNG government and landholders have the right to take a 22.5% interest in the scheme. The French player's final stake is likely to be 32.5%.
A final investment decision on the export project is expected in 2016 with first LNG shipments targeted in 2020. Appraisal work is due to be finished by 2015.
Analysis from Wall Street research house Bernstein shows the deal price appears in line with recent LNG transactions.
Based on the base-case resource estimate, the deal values the gas resource at $0.47 per 1000 cf, which compares to an average price paid for resources aimed at LNG developments of $0.55/'000 cf over the last four years.
The deal makes strategic sense for Total following its entry into the emerging gas province last year. The French company, which joined Oil Search in a venture to probe frontier Gulf exploration acreage, is aiming to develop a new gas production and liquefaction hub in the region.
PNG's minister for Petroleum and Energy, William Duma, said he strongly supports the deal, which suggests the government is finally reassured that InterOil has found a large international partner with a strong background in LNG project development.
In May 2012, Duma threatened to revoke InterOil's licence unless it was able to find a larger partner to come onboard and help it develop an 8 million tonne per year (t/y) LNG project as specified in a 2009 agreement.
Duma eventually backed off from this threat when InterOil entered into negotiations with Shell.
Total beat the likes of ExxonMobil and Shell, who were both eager to buy a stake in the resource base, which could lead to PNG's second LNG export scheme.
ExxonMobil, which is building the nation's maiden LNG complex, is likely to be more motivated to develop a third and fourth train at its PNG LNG plant organically from the existing resource base, having missed out on the Elk-Antelope resource, says Bernstein.
The $19bn 6.9m t/y two-train project is nearing completion and is due to start-up in the second half of 2014.
Analysts are confident that ExxonMobil will take a final investment decision on train three in 2015 given its resource base at P'nyang and further upside in the Hides field.