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Chinese firms prepare Liquid Niugini LNG bids

Papua New Guinea - Oil & Gas - Jun 29 2009

Two Chinese state-run companies are allegedly planning a bid for up to 35% in the Liquid Niugini liquefied natural gas (LNG) project in Papua New Guinea (PNG), according to a report in the South China Morning Post newspaper, which did not cite sources. Liquid Niugini’s operator InterOil has been looking for strategic partners to help finance the US$5bn export terminal near the PNG capital Port Moresby, which is scheduled to begin exporting 5mn tonnes per annum (tpa) of LNG starting in 2015.

According to the South China Morning Post, China National Offshore Oil Corporation (CNOOC) and PetroChina are planning to launch a bid worth up to US$500mn for a stake in Liquid Niugini. The report did not specify whether offers would be made by the parent companies or their listed subsidiaries. Representatives from CNOOC and PetroChina were not available for comment when contacted by Reuters on June 29.

On April 15, CNOOC signed a Heads of Agreement (HoA) with PNG’s national energy company Petromin to co-operate on the development of the Liquid Niugini project. The agreement, however, did not specify the role CNOOC would play in the project. The South China Morning Post report suggests that CNOOC is interested in a direct equity stake. In April 2009, CNOOC’s chairman Fu Chengyu announced that in the foreseeable future, the company would not attempt foreign takeovers but instead ‘will seek partners who need to make investments and form joint ventures with them’.

InterOil has been looking for new Liquid Niugini partners following Merrill Lynch ’s exit from the project in March 2009. In May, the Canadian independent announced that it had received strong interest from major oil companies and utilities. According to Reuters, one of the interested parties is Thai national energy company PTT. Other companies that have been touted as potential bidders include European majors Eni and Total, US independent Marathon Oil and Japanese companies Mitsui and Osaka Gas.

InterOil holds a 50% stake in Liquid Niugini and owns the marketing rights to its LNG output. The remaining 50% is held by Pacific LNG, a consortium of majors BG Group, Pan American Energy (a venture of BP and Argentine company Bridas) and Repsol YPF. The pressure on InterOil to move the project forward has been mounting following recent advances made by the rival PNG LNG consortium led by Exxon Mobil.

Exxon began preliminary infrastructure works for the 6.3mn tpa PNG LNG project earlier in June and on June 22 announced that it had signed a deal with two Japanese utilities for the purchase of two thirds of the project’s annual output capacity. Exxon is in negotiations with another Chinese company, China Petroleum and Chemical Corporation (Sinopec), for the purchase of the remaining third of the output. In view of PNG LNG’s rapid progress, InterOil needs to move fast to secure a major financial backer for Liquid Niugini if it is to secure the project’s future.