Palmer mulls Exxon deal
Australian Financial Review, 6 February 2012
Mining billionaire Clive Palmer is considering an offer from ExxonMobil to secure rights to explore his expansive gas deposits in Papua New Guinea.
Mr Palmer said Exxon first approached him in 2010 and he held further discussions with the global oil giant again late last year.
PNG-based oil and gas company Chinampa Exploration, a subsidiary of Mr Palmer's Mineralogy, has offshore exploration licences at the northern end of the Gulf of Papua, west of the capital of Port Moresby.
Mr Palmer told The Australian Financial Review that Exxon had proposed "farm-out" arrangements whereby the major would fund exploration work to potentially tap into the area's gas deposits in return for a stake in the venture.
Chinampa holds oil and gas exploration licences covering more than 43,000 square kilometres. The company is in the very early stages of exploration and needs significant funding to help with high exploration costs.
Mr Palmer said he had spent $40 million on geological tests which showed there was potential to find gas when drilling begins.
"This project could be bigger than the North West Shelf - it's the most significant thing we're doing at the moment," Mr Palmer said.
"There's a $16 billion LNG project going on with Exxon at the moment and our gas [site] is right opposite that."
Mr Palmer said the offer from Exxon was "a standing offer" and "we're thinking about it".
"We don't want to make hasty decisions. But we're either going to develop it, joint venture it or do a deal with the Chinese."
Through its subsidiary Esso Highlands, ExxonMobil is already working on the $16 billion PNG liquefied natural gas project, where construction work has been disrupted by a recent landslide.
Asked about the proposed deal with Mr Palmer, Esso Highlands spokeswoman Rebecca Arnold said: "It's not ExxonMobil's practice to comment on commercial matters."
Mr Palmer declined to discuss the details of Exxon's offer but it is believed that, under the proposal, the company would get a certain percentage of Chinampa's tenements and would have an option to do more drilling down the track.
Chinampa has three exploration licences in shallow to deep water close to the planned LNG plant at Port Moresby.
Mr Palmer plans to make a formal announcement on the offer later this year. Chinampa has also been in discussions with the PNG government on the project.
Last June, Mr Palmer spoke at a dinner that raised about $10,000 for the country's United Resources Party. He has described PNG as "the promised land" and is hoping to find oil and gas to sell to China for the country's growing energy needs.
"If we find gas, we develop it and make billions of dollars out of it," he said.
"First we're looking at reserves and then the cost of extracting . . . But it looks very promising." There's a real need for more energy in the world."
Mr Palmer claimed the $40 million spent on 3D seismic geological tests revealed 22 trillion cubic feet of gas.
"We looked at a comparative company in the US with that many reserves and with that amount it's worth about $60 billion [in market capitalisation]," he said.
Oil and gas experts said while the geological tests would indicate a potential for drilling, it was too early to tell its value. PNG LNG is scheduled to start shipments to its Asian customers in 2014.
One expert who wished to remain anonymous said: "Exxon Mobil are very good at what they do and don't look at something unless they think there's potential."