InterOil Corporation (NYSE: IOC) (POMSoX: IOC) today announced that the PNG National Government has signed the Company's Project Agreement for the construction of a liquefied natural gas (LNG) plant in Papua New Guinea.
Following approval of the Project Agreement by the National Executive Council on December 10, the Minister for Petroleum Hon William Duma and acting Governor-General Dr Allan Marat signed the Agreement securing PNG's second LNG project. The signing was witnessed by the Prime Minister Sir Michael Somare. The Agreement sets fiscal terms for a twenty year period, which include a 30% company tax rate and certain exemptions applicable to large scale projects of this nature. It also provides for a 20.5% ownership stake to be held by the Government of Papua New Guinea's nominee, Petromin PNG Holdings Limited. A further 2% ownership stake will be taken by landowners directly affected by the plant.
As previously announced, the proposed LNG project would be developed by InterOil and its joint venture partners Pacific LNG Operations Ltd. and Petromin PNG Holdings Limited. The project targets a $5 to $7 billion LNG facility, with multiple trains. Additionally, the Agreement provides for the expansion of the plant up to 10.6 million tons per annum (mmtpa). While current plans call for first production of LNG towards the end of 2014 or beginning of 2015, InterOil is progressing a proposed liquids stripping plant, to be located in Gulf Province, in late 2011/early 2012, which would provide an attractive revenue stream prior to the commissioning of the LNG plant.
Sir Michael Somare, Prime Minister of Papua New Guinea, stated, "The government of Papua New Guinea, through its long standing partnership with InterOil, has secured an ownership stake across the entire value chain from wellhead to LNG offtake in a world class energy development project that will significantly contribute to national prosperity and fiscal security for many years to come. The national equity interest, to be held by the state's nominee Petromin PNG Holdings Limited, aligns the Country's economic interests with its partners and provides strategic assets for national security."
Phil Mulacek, Chief Executive Officer of InterOil, commented, "The Government of Papua New Guinea has firmly demonstrated its commitment to delivering a stable, long-term supply of energy to a growing Asian market. The recent agreements set the stage for PNG to become a significant new Asian energy hub."