A $2.2 billion liquefied natural gas deal in the Pacific island nation of Papua New Guinea would not normally attract the interest of an oil industry super-major such as Exxon Mobil -- if it wasn't for corporate pride and a desire to keep the French out of Exxon Mobil's backyard.
Until last week the U.S. company was the dominant player in PNG's gas export industry with a 33.2% stake in the only existing project, along with the status of operator.
But, if a deal involving an undeveloped group of gasfields proceeds as planned the French oil company,
What's happened is that PNG's local oil and gas champion,
Complex Moves
As part of the complex transaction Total has entered into a secondary transaction that will see it buy a bigger stake in the Elk and Antelope fields with Oil Search allowing its stake to be watered down to 29% in the proposed new development the same percentage it already holds in the Exxon Mobil run PNG LNG project.
Total is keen to quickly develop Elk and Antelope and use them as its entry into the fast-growing Asian LNG business.
Exxon Mobil would be less keen because it has been eyeing Elk and Antelope as potential sources of additional gas for the PNG LNG business which currently has two production trains (gas liquefaction units) but has room to add another two trains if the gas is available.
Deep PNG Roots
Oil Search, which is listed on the Australian stock exchange, is king maker in what's happening thanks to its PNG roots which date back to 1929 and a close association with the government of PNG which has a 10% stake in the business.
Over the past decade it has risen from an almost penny dreadful trading on the ASX at around 45c to a $7 billion business trading at trading at $4.75.
If Oil Search can successfully acquire InterOil, and then bring Total into the deal, it will emerge with a 29% stake in two LNG projects, one run by Exxon Mobil the other by Total.
Wild Cards
There are, however, two wild cards in the pack. The first is whether Exxon Mobil is prepared to stand clear and permit Total into its backyard, potentially inhibiting plans to add the third and fourth trains at PNG LNG, and whether the PNG Government would prefer two separate LNG projects or one giant development controlled by Exxon Mobil.
In two words, the PNG gas situation is called "game on".