The Woodlands, Texas- and Cairns, Australia-based InterOil Corp. (NYSE: IOC) and Liquid Niugini Gas Ltd., its joint-venture company with Pacific LNG Operations Ltd., have entered an agreement with Energy World Corporation Ltd., Hong Kong, (Australia: EWC) to construct a 2-million-tonne-per-annum (Mt/a) land-based LNG plant in the Gulf Province of Papua New Guinea (PNG).
The Train 1 LNG plant is expected to process an estimated 1.5 trillion cubic feet (Tcf) of gas over 15 years, with early-stage capital expenditure estimates amounting to US$455 per metric tonne of LNG production. The plant's capacity could potentially be expanded to 3 Mt/a.
In return for its commitment to fully fund the plant, Energy World will be entitled to a fee of 14.5% of the proceeds from the sale of LNG from the plant.
InterOil believes the partnership is an opportunity to accelerate the intended monetization of its Elk and Antelope resource in PNG.
InterOil holds approximately 3.9 million acres, an oil refinery and retail and commercial distribution facilities in Papua New Guinea. In addition, InterOil is a shareholder in a joint venture established to construct an LNG plant on a site adjacent to InterOil's refinery in Port Moresby, Papua New Guinea.
Following the company's announcement, Morgan Stanley & Co. Inc. increased its price target on InterOil from $125 to $135.
"We believe the announcement represents a material improvement in the potential monetized value of InterOil's gas resource," Evan Calio said in a Sept. 30 research note. Further, Calio says Morgan Stanley anticipates higher returns that previously assumed from the company's new model for LNG development.
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