Total, InterOil close Papua New Guinea deal

InterOil and Total SA have finalized a revised sales and purchase agreement for the Elk-Antelope gas-condensate field in petroleum retention licence 15 (PRL15) in the eastern highlands of Papua New Guinea.

The agreement, signed Mar. 26, gives Total a 40.1% interest in the license, acquired through the purchase of all the shares of a wholly owned InterOil subsidiary company.

The original deal, worked out in December 2013, allowed InterOil to retain a 30% interest in the proposed LNG development at Elk-Antelope. The new deal gives InterOil 35.5% interest.

InterOil will receive $401 million immediately for closing the transaction. It will receive an additional $73 million upon a final investment decision being made for the Elk-Antelope project and another $65 million on the first shipment of LNG from the project.

InterOil also will receive payments for certified gas volumes following the Total-operated appraisal drilling program at the fields.

Oil Search Ltd. also recently joined the consortium when it purchased a 22.8% share of PRL15 through the acquisition of Pacific LNG Group Cos. (OGJ Online, Mar. 14, 2014). Indirect participating interests hold 1.6%.

Oil Search funded its acquisition through the placement of 149.9 million Oil Search shares to the Papua New Guinea government giving the state a 10.1% holding in Oil Search. The government funded this purchase through a $1.1 billion loan with Swiss investment bank UBS that included a $335 million bridging loan and a $904 million collar facility.

The controversial deal came under pressure this week when the Papua New Guinea ombudsman attempted to freeze the loan and investigate whether it was legally compliant. The government intends to use dividend revenue from its stake in the ExxonMobil Corp.-led group’s PNG-LNG project as collateral for the borrowing to fund the Oil Search investment instead of channelling the revenue as originally planned into the country’s sovereign wealth fund.

A body of opinion in Papua New Guinea says the change should not be allowed, however the freeze could not be put into place because the deal has already been signed and concluded. This means the ombudsman will only be able to review the loan process rather than prevent it from taking place.

Papua New Guinea Prime Minister Peter O’Neill who has been driving force behind acquisition of the Oil Search shares has welcomed the ombudsman commission’s decision to review to UBS loan. He says the loan was obtained so Papua New Guineans, through the government, can own a part of Oil Search, which is a strategic company and a direct player in the development of the country’s petroleum resources.

Former Treasurer Don Poyle says he was recently sacked from his portfolio by the prime minister because of his opposition to the UBS loan.

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