Papua New Guinea: Top men say pipeline deal appears nearer, "Everybody is at the stage to do a deal"
PostCourier, Port Moresby, March 4
A DEAL to secure the PNG to Queensland gas project is only weeks away, according to Oil Search Ltd, one of the project's key participants.
A similar view was put forward by another partner, Orogen Minerals, last week when releasing its 1998 results.
Oil Search chairman Trevor Kennedy said in a report to the Australian Stock Exchange yesterday that his company believed a commercial resolution to the issue of gas field integration "is possible in the short-term".
And managing director Peter Botten told AAP the deal was close.
Mr Kennedy said Oil Search's purchase of BP's interest in the Hides gas field provided the opportunity for the Kutubu and Hides partners to establish commercial terms to guarantee sufficient reserves for markets in Queensland.
"Although parties have come close to agreement over the last few months, details of the mechanisms for reserve integration remain to be agreed," Mr Kennedy told the ASX.
"Material discussions are presently being undertaken. We believe a commercial resolution to this issue is possible in the short-term, given the pressure exerted from governments and the markets, and the need for rapid resolution."
Mr Botten said he was off to the United States overnight for talks with the pipeline project's two main participants, Exxon and Chevron, in a bid to finalise a deal.
"Everybody is at the stage to do a deal," Mr Botten said, although he conceded he had thought a deal was close on at least two other occasions in the last couple of months.
He said the problem for the project partners had been finding an appropriate way to cut up the proposed pipeline's financial "cake" while the partners were still trying to define exactly what the cake was.
"We are trying to cut a financial cake which is extremely difficult to define," Mr Botten said in a reference to how Exxon and Chevron would divide up the integration of the project's gas reserves.
"There is clearly a need to define markets (for the gas) but the markets are hanging back until we fix the upstream."
The original target for the gas project to start production was the end of 2001 ''although, clearly that (deadline) is stressed''.
American petroleum majors Chevron and Exxon will be meeting in Chevron's head office in San Ramon, California tonight (local time) to iron out gas integration mechanisms.
Chevron is the operator of the Kutubu joint venture while Exxon is representing the Hides joint venture partners.
Petroleum and Energy Minister Sir Rabbie Namaliu has recently warned the Government's patience was running out after delays to the gas project.
Gas project officials have acknowledged "the ball is now in our courts", and said they took Sir Rabbie's recent statement as a challenge.
Mr Botten also underlined the importance of the gas pipeline project to Oil Search, particularly in the current low oil price environment.
He said Oil Search could cope with a $US12.00 oil price having got itself down to a ''fighting weight'' in the last six months but the company's priority was to commercialise its gas reserves in PNG.
"Clearly the focus very much is to commercialise the gas," Mr Botten said.
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