InterOil to ‘strongly defend’ Elk-Antelope deal with Total


InterOil says it will strongly defend the recent deal it signed with French oil company Total SA involving the Elk-Antelope gas fields Gulf Province.

InterOil's Michael Hession

InterOil’s Michael Hession

Oil Search Ltd is contesting Total SA’s purchase of a 40 percent stake in PNG’s biggest undeveloped gas field, but has yet to specify its complaint.

InterOil’s Chief Executive Officer Michael Hession has told analysts he expects the dispute to go to arbitration in London.

‘Any proceedings commenced by Oil Search seeking to set aside the transaction completed with Total S.A. on March 26, 2014 … will be strongly defended,’ Sydney-based InterOil spokesman, John Hurst told Business Advantage PNG in a statement.

The fight centres on the vehicle that InterOil used to sell down its stake in the Elk and Antelope licence to Total, according to analysts.

Total purchased the InterOil subsidiary that held the 40 per cent stake rather than an acquisition of the stake itself.

If InterOil had sold a stake in the Elk-Antelope asset directly to Total, it would have been obliged to offer Oil Search the opportunity to match that offer, they say, adding Oil Search said when it bought into the joint venture that it would exercise that right.

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‘They’re disputing whether the pre-emptive rights should have been triggered,’ said UBS analyst Nik Burns.

It makes Oil Search’s preemption rights unclear, according to Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co.

Oil Search used a similar strategy to buy its stake in the Elk-Antelope joint venture. It paid $900 million to take control of Pac LNG Group Companies, which held the 22.8 percent interest in Elk-Antelope, rather than buying the asset stake directly.

InterOil’s chief executive, Michael Hession, says an investment decision on PNG’s second LNG plant could be made within two-and-a-half years and shipping of LNG by 2020.

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