InterOil Says New Well to Confirm Reserves for PNG Gas Project

By Angela Macdonald-Smith

Oct. 11 (Bloomberg) -- InterOil Corp. expects a new well to confirm sufficient gas reserves to underpin its proposed liquefied natural gas project in Papua New Guinea.

Drilling is to start in the next few days on Antelope-1, targeting a zone detected in Elk-4, a well that yielded a record- high gas flow rate for Papua New Guinea, Toronto-listed InterOil said in a statement distributed on Marketwire. Expected results from Antelope-1, along with gas already found at Elk, should be enough to supply the project, it said.

InterOil is developing the LNG project with the commodities unit of Merrill Lynch & Co. and Pacific LNG Operations Ltd. to tap rising demand from Asian utilities for cleaner-burning fuel. The venture dropped plans to start exports in 2012 and may start up in 2013 or 2014, the company said earlier this week.

InterOil is ``confident'' an agreement with the Papua New Guinea government on fiscal terms for the project will be concluded this quarter, Phil Mulacek, chief executive officer, said in the Oct. 10 statement. The agreement was originally due by the end of last year.

InterOil fell 22 percent to C$12.88 in Toronto yesterday.

Papua New Guinea Prime Minister Michael Somare confirmed his intention to conclude the fiscal agreement during meetings earlier this week in Rome, Mulacek said.

Exxon Mobil Corp., the biggest U.S. oil company, is leading a rival LNG venture planning an $11 billion project in Papua New Guinea. Eni SpA, Italy's largest energy company, said earlier this week it may make similar LNG investments in Papua New Guinea.

LNG is natural gas chilled to liquid form, reducing it to 1/600th of its original volume, for transportation by tanker to destinations not connected by pipeline.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net