Total pushes forward with InterOil PNG gas deal
PARIS (Bloomberg) -- Total SA paid an initial $401 million to InterOil Corp. for a stake in its natural gas discoveries in Papua New Guinea, sidestepping opposition from Oil Search Ltd.
InterOil received the money even as Oil Search, Papua New Guinea’s largest oil and gas producer, contests the accord reached last month with Total, John Hurst, a Sydney-based spokesman for InterOil, said today in an emailed response to questions. InterOil expects the dispute to go to arbitration in London, CEO Michael Hession said yesterday on an analyst call, according to a transcript.
Oil Search, which agreed in February to buy part of the same discoveries for an initial $900 million, lodged a dispute last week with InterOil. The fight is over fields in Papua New Guinea that may underpin an expansion of the country’s LNG industry.
Oil Search is already Exxon Mobil Corp.’s partner in the $19 billion Papua New Guinea LNG venture, while Total and InterOil want to build a second export development based on gas from the Elk and Antelope fields. InterOil on the same analyst call yesterday estimated the cost of drilling three wells in the Pacific nation will be $140 million to $150 million.
Ann Diamant, a spokeswoman for Oil Search in Sydney, said she couldn’t immediately comment.
Oil Search’s deal to buy part of InterOil’s fields from minority partners gave the company the right to preempt Total’s initial agreement in December, according to a JPMorgan Chase & Co. report in February. Total and InterOil revised their agreement on March 26, structuring the deal so that Oil Search couldn’t block the accord, Citigroup Inc. said last week.
Total acquired 40.1% of the Elk and Antelope fields, leaving InterOil with 35.5%. In the revised accord, Total purchased an InterOil unit that held the 40.1%, rather than buying the stake itself.
Should Oil Search block Total, it could open the door for Exxon to enter the license and clear the way for the U.S. company to feed an expansion of its LNG project, Benjamin Wilson, a Sydney-based JPMorgan analyst, wrote Feb. 27.