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Exxon making moves on Papua New Guinea

Asian Development Bank warned gains from gas in PNG may be short-lived.

By Daniel J. Graeber
Exxon making moves on Papua New Guinea
Exxon in bidding war to acquire natural gas assets in Papua New Guinea. Photo courtesy of Woodside Petroleum.

MELBOURNE, July 18 (UPI) -- Exxon Mobil made a "superior" offer for an acquisition of assets including natural gas deposits in Papua New Guinea, InterOil Corp. announced Monday.

InterOil is the target of an estimated $2.2 billion unsolicited offer from Exxon Mobil.

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"The company's board of directors, in consultation with its legal and financial advisors, has determined that the ExxonMobil offer constitutes a 'superior proposal,'" InerOil said in a statement.

The Australian company said Exxon offered $45 worth of shares per InterOil share, plus a set payment for each trillion cubic foot equivalent of resources in the Elk-Antelope basin in Australia, subject to a cap of 10 trillion cubic feet equivalent.

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A liquefied natural gas project in Papua New Guinea, led by Exxon Mobil, marked a milestone with its 100th delivery last year. More than 7 million tons of LNG have been shipped from the facility since it opened two years ago.

The agreement trumps a rival offer from Oil Search Ltd., which is backed in part by French energy company Total. Oil Search holds a key stake in Papua New Guinea's LNG sector and touts itself as a company with a potential for capital and resource growth.

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In December, Woodside Petroleum, Australia's largest oil and gas company, withdrew an $8.1 billion proposal to acquire Oil Search. Oil Search at the time expressed caution about the outcome of the deal, saying it undervalued the company.

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The offer from Exxon comes as energy companies re-evaluate their strategies with crude oil prices holding in the upper $40 per barrel range. Rivals from Royal Dutch Shell to Schlumberger have acquired smaller rivals in an effort to streamline capital in the weakened oil economy.

For Papua New Guinea, meanwhile, the deal emerges amid uncertainty about the country's economic trajectory. Last year, the Asian Development Bank warned the gains from LNG may be a "one-off boost."

Each side has three days to consider the Exxon proposal.

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