A war of words over Total’s move into a major gas project off Papua New Guinea has erupted after the country’s largest oil producer contested the French giant’s deal with InterOil.
Oil Search, has lodged a dispute with InterOil over ite sale to Total of a 40% stake in the Elk-Antelope fields – which could contain trillions of tons of gas resources.
Total secured a deal for more than $400million to acquire the stake in the project from licence holder Interoil, with further payments structured which could take that sum to $530million.
But Oil Search, which agreed last month to buy a 22.8% stake in the same discoveries for an initial $900 million, has now lodged a protest at the deal which could force the arrangement into international arbitration and have major consequences over plans to develop the project.
The fight centres on the vehicle that InterOil used to sell the stake to Total, which Oil Search claims bypassed its pre-emptive rights on the share.
InterOil will “defend its position strongly,” said spokesman John Hurst.
“Any proceedings commenced by Oil Search seeking to set aside the transaction completed with Total will be strongly defended.”
Oil Search is already Exxon Mobil Corp.’s partner in the $19billion Papua New Guinea LNG venture that’s proceeding along with seven others in Australia to tap rising Asian demand.
Total and InterOil want to build a second export development based on gas from the Elk and Antelope fields.
If Oil Search stopped Total, it could open the door for Exxon to enter the license and clear the way for the U.S. company to feed an expansion of its LNG project.
“There are very strong synergies between the PNG LNG project and any development of Elk-Antelope,” said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., said today by phone.
“We can only speculate that Oil Search feels that by bringing in Exxon, it’s a more aligned partnership.”