(By Balaseshan) InterOil Corp. (NYSE: IOC) said it has received notification from the Prime Minister Peter O'Neill that the National Executive Council (NEC) of Papua New Guinea has approved InterOil's LNG development project in the Gulf Province.
The decision clears the way to proceed with InterOil's plans for an LNG plant in the Gulf Province with initial output of a minimum of 3.8 million tonnes per annum.
The decision also approves the acquisition by the State of an additional 27.5% equity interest in the Elk/Antelope gas fields, over and above the 22.5% interest to which it is entitled under the Oil & Gas Act, on terms to be negotiated with InterOil.
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InterOil said Papua New Guinea plans to take its entitlement to gas from the project in kind, to be used in part in domestic power generation and natural gas related industries thereby providing a boost to PNG's growth and prosperity.
The NEC has approved the establishment of a State negotiating team to discuss and agree to the necessary amendments to the 2009 project agreement between the State and Liquid Niugini Gas Limited, to give effect to the NEC decision, and to agree on the terms on which the State will acquire the additional equity interest.
The NEC decision confirms that the basis of the acquisition will be commercial market terms. The NEC also includes as a condition of its approval an agreement with regard to an internationally recognized operator of the facilities. InterOil is ready to participate in these discussions, which it expects will commence shortly.
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Given the importance of the LNG project, the PNG Cabinet also approved the establishment of the Ministerial Gas Committee comprised of key economic ministers to fast track commercialization of the county's second LNG project.
Now that the Government's position has been clarified, InterOil anticipates being able to conclude deal for a sale of an interest in the Elk and Antelope resource in Petroleum Retention Licence 15 and the first 3.8 million tonnes per annum Gulf LNG Train to a partner or partners in the coming weeks. Major oil companies, national oil companies, and Asian utilities have been actively engaged in the process.
IOC closed Thursday's regular session up 3.40% at $61.42. The stock has been trading between $44.48 and $99.05 for the past 52 weeks.