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Total to pay InterOil up to $3.6 billion in Papua New Guinea LNG deal

BY JAMES PATON

PARIS (Bloomberg) -- Total SA, Europe’s third-biggest oil company, agreed to buy a stake in InterOil Corp.’s assets in Papua New Guinea in a deal valued at as much as $3.6 billion as part of a plan to build a liquefied natural gas project.

Total will acquire 61.3 percent of a license that includes the Elk and Antelope gas fields in Papua New Guinea and get the right to invest in further exploration blocks, InterOil said yesterday in a statement. InterOil valued the deal at $1.5 billion to $3.6 billion, depending on the size of the resources.

InterOil has been searching for an international partner to help fund a Papua New Guinea natural gas project since 2009 and said in May that it had started discussions with Exxon Mobil Corp. to develop the fields. Exxon and partners including Oil Search Ltd. are building a $19 billion LNG project in Papua New Guinea due to start in 2014 to meet rising Asian demand.

“For four years we’ve had uncertainty,” said David Neuhauser, who manages about $100 million at Livermore Partners Inc. in Northbrook, Illinois and recently bought InterOil shares. “Now there’s a path toward the future for the company. The partner they’ve chosen in Total speaks volumes.”

Shares of InterOil have surged 60 percent in New York trading this year and closed yesterday at $88.63.

Paris-based Total will operate the proposed LNG project, which will depend on the gas resources being certified and engineering and design work, according to the statement. InterOil said it will keep 30 percent of an LNG development..

Calls to Total’s offices in Perth, Australia, weren’t returned.

The planned LNG development would follow Exxon’s venture in Papua New Guinea, which is proceeding along with seven others in Australia that are estimated to cost about $180 billion. Exxon said earlier this year that it was interested in InterOil’s assets to help expand its LNG project.

Total reached a deal last year with Port Moresby-based Oil Search, which owns a 29 percent stake in the Exxon project, to explore for gas in PNG, while Royal Dutch Shell Plc said in 2011 it would look at opportunities in the country.

Total and InterOil also agreed to look at more opportunities in Papua New Guinea and the Asia-Pacific.

Elk-Antelope is one of the largest discoveries in Asia in the past two decades, InterOil CEO Michael Hession said in the statement. Phil Mulacek, who founded the Papua New Guinea exploration company, retired as CEO in April.

“PNG has very substantial gas resources, and this brings in a world-class LNG operator,” Tony Regan, a Singapore-based energy consultant at Tri-Zen International Inc., said today in a phone interview. “This deal will give people confidence that these reserves can now be monetized as LNG.”

Payments to InterOil include $613 million on the completion of the transaction, expected in the first quarter of 2014, and $112 million after a final investment decision for a new LNG plant, InterOil said. Total will pay a further $100 million after the first LNG cargo, InterOil said. Variable payments will depend on the size of the resources, estimated at 5.4 trillion to 9 trillion cubic feet of gas it said.

InterOil was advised by Credit Suisse Group AG.

12/06/2013

 

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