With the PNG LNG project now in production, all eyes are on Papua New Guinea’s next likely gas project: Papua LNG. InterOil Corporation has been with the project, based on the Elk-Antelope gas fields in Gulf Province, since its inception. Chief Executive Officer Michael Hession tells Business Advantage PNG why the project is still promising, even in a time of low global gas prices.

A well test at Antelope 5 in Gulf Province. Source: InterOil

Business Advantage PNG: When we last interviewed you, in early 2015, you said that 2014 had been about re-focusing InterOil as a business and that 2015 would be about delivery. How has InterOil fared against that stated goal? What are your priorities for 2016?

Michael Hession: In 2015, we made significant progress in our Elk-Antelope project. The joint venture unanimously appointed Total SA as operator of the project. We also selected key infrastructure sites for the development.

2016 is about staying focused on the Elk-Antelope appraisal program, our certification payment and advancing into the basis of design. Outside of Elk-Antelope, we have three other discoveries that we are firming up for future monetisation.

Business Advantage PNG: Has the drop in global prices changed the time frame, or any other aspect of the Elk-Antelope project in recent months?

Michael Hession: The major advantage of developing LNG in PNG is that it offers the lowest costs compared to many other greenfield projects around the world; not to mention being close to the world’s largest LNG markets in Asia.

InterOil’s Michael Hession

In recent months, this interest in PNG has been accentuated with considerable commercial activity and interest in PNG as an LNG producer—with Repsol’s acquisition of Talisman, Woodside’s attempted acquisition of Oil Search and Scepter’s bid for Santos.

On a geopolitical front, PNG’s Prime Minister Peter O’Neill made a visit to Japan in October last year. In the same trip, Japan had mentioned that it is considering PNG as a priority for LNG procurement.

‘The project is expected to have a similar impact on PNG’s Gross Domestic Product as the PNG LNG Project, resulting in a boost to economic activity.’

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So, interestingly, despite the oil prices falling, we are actually seeing PNG gaining prominence in the global stage.

Global LNG forecasts suggest that LNG demand will exceed contracted supply early in the next decade, right about the time when Papua LNG is expected to deliver its first gas. We believe we are in an advantaged position to capture the next wave of growth.

Business Advantage PNG: What are the development prospects for Gulf and Central Provinces as a result of the project?

Michael Hession: The first LNG project for PNG was a real nation builder, which provided PNG and the Highlands region with opportunities for training, employment, support infrastructure and revenue. We expect the second LNG project to provide a similar positive impact for the community.

A gas rig at Antelope 6—one of the wells that will feed the Papua LNG project. Source: InterOil

The partners will work closely with all levels of government on benefits-sharing and the development forum process will help to identify employment, business, infrastructure and community development opportunities.

The project is expected to have a similar impact on PNG’s Gross Domestic Product (GDP) as the PNG LNG Project, resulting in a boost to economic activity.

Business Advantage PNG: How do you see the longer term demand for LNG in the region?

Michael Hession: We are optimistic about the long-term demand for LNG. In fact, global forecasts have suggested global demand will outstrip contracted supply in the 2020s. During that time, Papua LNG will be ready to supply LNG to a growing market.

Beyond the Elk-Antelope discoveries in PRL 15, we have made discoveries at Triceratops, Raptor and Bobcat and we have significant equity in our exploration acreage over the highly prospective East Papuan Basin.

Outside of the Papua LNG project, InterOil has significant equity in its three discoveries with many options for their monetization—including feeding-back to one of the two projects that are in country or, if it is large enough, to feed its own LNG development.