France’s Total and InterOil Corp. of the U.S. will spend up to $3.6 billion to develop two Papua New Guinea (PNG) natural gas fields, they said.
Total will pay $613 million up front for a majority stake in the Elk and Antelope gas discoveries in PNG, the Wall Street Journal first reported.
“Further payments hinge on confirmation of the size of the natural-gas resource, and a final investment decision on constructing a plant to process the gas into liquefied natural gas, or LNG, for export,” the report said.
Overall development costs could hit $3.6 billion to develop the reserves.
Elk and Antelope are among the largest natural-gas discoveries in Asia in the past two decades, InterOil Chief Executive Michael Hession said in a statement “It puts the amount of natural gas at 6.83 trillion cubic feet to 10.85 trillion cubic feet. The maximum payment from Total is conditional on certification that the discovery contains at least 9 trillion cubic feet,” according to the WSJ.
Papua New Guinean government and landowners have the right to acquire a 22.5% interest in the project, leaving Total with 47% and InterOil 30%.
Among Southeast Asian countries, PNG has been a laggard in oil and gas development. But Exxon is investing $19 billion in an LNG project that starts up in 2014. In Asia, demand for energy is growing in mega-markets Japan, South Korea, Taiwan and China.
“InterOil’s deal with Total means Papua New Guinea is now more likely to get a second stand-alone LNG project, while Exxon and partners including Oil Search and Santos Ltd. source gas for an expanded plant from elsewhere,” the Wall Street Journal said.