INTEROIL CORPORATION

INTEROI L CO R P O R AT I O N

Leveraging LNG for the good of PNG www.interoil.com

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ENERGISING InterOil is helping some of the world’s leading oil & gas players to capitalise on the wealth of opportunities that Papua New Guinea’s LNG market can offer Written by: Matthew Staff • Project Manager: Eddie Clinton

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NG ASIA nterOil Corporation is partnering with one of the world’s major LNG players to develop one of Papua New Guinea’s most significant projects.

Total of France is the global heavyweight in question, selecting InterOil, as well as Oil Search, as the ideal collaborators with which to develop the Papua LNG Project based on the Elk-Antelope gas field in the country’s Gulf province.

This latest partnership signals a rapid step-change in perceptions surrounding Papua New Guinea’s

investment risk over the past year, as Thomas Nador, InterOil’s Senior Vice President, Corporate, explains: “When the first shipment of liquefied natural gas left Papua New Guinea’s PNG LNG Project in Port Moresby in mid-2014, the US$19 billion project came in ahead of schedule and demonstrated to the world that Papua New Guinea could develop mega projects.

“It effectively de-risked the nation as an investment destination.”

Independent analysis by Sanford Bernstein further emphasises this point, highlighting that the ExxonMobil-operated project in

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2014 was one of the world’s most efficient LNG developments, with a construction cost of around US$2,300 a tonne.

“Analysts are suggesting that ElkAntelope could be even lower cost than the ExxonMobil project because it will require less infrastructure to develop, need shorter pipelines and is in a less remote part of the country than the PNG LNG Project,” Nador adds.

Fully committed

Elk-Antelope, which was discovered by the US-listed InterOil in 2006, is in the final stages of appraisal and the giant field is already described by the Company as one of the largest finds in Asia over the past 20 years.

Initial estimates suggest the field could have enough gas to underpin a two-train project to produce about seven million tonnes of LNG, a year, for the next 20 years.

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AIRWAYS HOTEL

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irways Hotel is Papua New Guinea’s leading hotel and one of the world’s most unique airport hotels.

The hotel is nestled in its own botanical gardens in one of the Pacific’s most striking and inspiring settings.

While its surroundings are remarkable, the hotel’s international reputation has been built on equally unique interiors, not to mention first-class service and a passionate attention to detail.

The hotel offers finely appointed rooms, exquisite decor and world-class facilities in an environment that is calm, secure and spacious.

InterOil Chief Executive, Dr Michael Hession (right) signs an agreement with Total executive, Jean-Marie Guillemou for the Elk-Antelope gas field in Papua New Guinea

The Company recently transferred operatorship of Elk-Antelope to Total following the French company’s acquisition of a 41 percent interest in the field in 2014.

InterOil Chief Executive, Dr Michael Hession recently reiterated to investors in New York that the joint venture and the Papua New Guinea Government were fully committed to the project.

“Total have a large team at work and the venture expects to enter front-end engineering and design for the LNG project in 2016,” he said.

“Total is ramping up their presence in Papua New Guinea and we now have a world-class LNG operator operating a world-class field.”

Unparalleled understanding

InterOil, which also has an office in Singapore, has shown its enthusiasm within Papua New Guinea, building on the foundations of its exploration

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Airways offers Papua New Guinea’s best fine dining restaurant, its most modern Health & Fitness Centre, a luxurious spa, and first-class suites that have housed world leaders and celebrities.

It also has a full range of amenities for the business traveller, from a modern, full service business centre, meeting rooms of various sizes to the Bits ‘N’ Pieces technology retail outlet.

Total is ramping up their presence in Papua New Guinea and we now have a world-class LNG operator operating a world-class field

The hotel’s Vue Restaurant and Vue Lounge Bar have recently received a major upgrade. Vue has long been famous for its fantastic views, but the upgrade has delivered new buffet and cold servery areas, and an open kitchen.

Meanwhile, the Vue Lounge Bar – a popular meeting place in the evening and at weekends – has been completely remodelled and expanded, with a counter that is a bartender’s dream, new plush seating, and a remarkable wave ceiling.

T +675 324 5200 E reservations@airways.com.pg

www.airways.com.pg

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HELIFIX OPERATIONS LTD

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he Oil & Gas Sector in Papua New Guinea continues to grow with innovative and exciting new opportunities for companies engaged in the region. One such company growing and responding to the demands of the industry has been Helifix.

CEO, Robert Agarobe has directed his company to industry-leading growth while maintaining a commitment to delivery of first-rate services to his clients that the company prides itself on.

Beginning work alongside InterOil in 2013, Helifix utilised its strong and longstanding client partnerships, its quality engineering crews and its vast fleet to achieve uncompromising commitment to the project. (29) This commitment in the Gulf Province was subsequently recognised with further partnerships to expand on operations.

InterOil’s workers on a seismic crew in Papua New Guinea

success where five consecutive discoveries were made in the Eastern Papuan Basin; described by geologists as the most exciting emerging hydrocarbon basin in the world.

InterOil’s licences, which cover 16,000 square kilometres, further affirm the business’s most dominant standing among all explorers within the basin. Recently, the Company told the New York Stock Exchange that its high-graded exploration targets and discoveries could hold an estimated 17 trillion cubic feet of gas equivalent.

“Papua New Guinea is dominated by two basins, one of which is lightly explored – the Eastern Papuan Basin – and the larger, and more heavily explored, adjacent Western Papuan Basin,” Nador says. “The two basins are separated by a major deep-seated fault and are discrete with different evolutions, each with different key geological components critical for success, different environmental

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Helifix’s dynamic business has continued to expand through capital investment and range additions, growing in a manner unrivalled by most aviation companies.

Papua New Guinea is dominated by two basins, one of which is lightly explored – the Eastern Papuan Basin – and the larger, and more heavily explored, adjacent Western Papuan Basin

The Company’s greatest asset however is its people, boasting a workforce that strives for success in an industry that accepts no failure, and promoting an attractive work environment for new, prospective employees.

Helicopter operations continue to add value, incorporating the latest in external cargo baskets, long line equipment, remote hook and carousels for efficient utilisation.

Helifix fixed wing and helicopters are also modified to suit the PNG climate to give the best possible performance in a demanding environment.

From humble beginnings, the business has consistently outperformed industry expectations and is fast cementing its reputation as a reliable, globallycompetitive business capable of carrying out efficient tasks in the most challenging environments.

HELIFIX OPERATIONS LIMITED

The best operators from around the globe.

“Helifix started work on the Interoil project in 2013 utilizing 1 Bell 212, 1 Cessna Supervan 900 and 2 x Bell 407 aircraft. The partnership with our client Interoil has seen our fleet grow to include 2x212, 5x407, 3x206 and 3 Cessna Supervan 900’s. With the uncompromising commitment to Quality and Safety through our Flight and Engineering Crews, Helifix has been able to facilitate our business partners with over 3000 hours flown annually by the fixed wing division and 12000 hours flown on our rotary division.”

SEISMIC OPERATIONS

ROTARY WING

2000+ SLING LOADS PER MONTH • MOVE MORE THAN 4500 PEOPLE PER MONTH

FIXED WING

10 SECTORS PER DAY

• 2000 PASSENGERS PER MONTH

Portion 1536, Jacksons Parade, Jacksons International Airport, Port Moresby, Papua New Guinea

P.O.Box 93, Port Moresby 121, National Capital District, Papua New Guinea

www.helifix.com.pg

LOGISTICS AVERAGE OF 193 PASSENGERS PER DAY

Phone: +675 3233968

Email: info@helifix.com.pg

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GADENS Gadens: your partner on the path to success Gadens is a leading legal services provider to clients in the energy and resources, property and construction, and financial services sectors with offices throughout Australia, as well as in Port Moresby in Papua New Guinea, and in Singapore.

Our continuous presence in Papua New Guinea for over 45 years means that we have an established reputation and a deep understanding of Papua New Guinea and its people, markets and government.

With one of the longest standing energy and resources practices in Papua New Guinea, Gadens has been a partner to InterOil for over 15 years.

PNG Prime Minister, Peter O’Neill meets drillers at InterOil’s Elk-Antelope gas field in the Gulf Province

conditions and operational challenges, and different exploration and drilling histories.

“Despite their significant differences they both have working hydrocarbon systems.”

So far, around 280 wells have been drilled in the Western Papuan Basin incorporating key discoveries at Hides, Juha, P’nyang, Kutubu, Stanley, Elevala and Ketu.

This basin, which is centred on the remote and rugged highlands of Papua New Guinea, underpins the PNG LNG Project with gas reserves of about nine trillion cubic feet and oil reserves of around 200 million barrels.

Nador continues: “Conversely, the Eastern Papuan Basin has only about 65 wells, and has resulted in key modern discoveries at Elk, Antelope, Triceratops, Raptor and Bobcat, all by InterOil.” To this point, InterOil has done extensive aero-gravity surveying

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Our extensive regional experience and involvement in almost every major project in Papua New Guinea, has seen us engaged by many leading multinationals in helping them convert prospects into real projects. Gadens is proud to partner with organisations such as InterOil on their path to success.

T +61 2 9931 4722 E ian.clarke@gadens.com

Conversely, the Eastern Papuan Basin has only about 65 wells, and has resulted in key modern discoveries at Elk, Antelope, Triceratops, Raptor and Bobcat, all by InterOil

www.gadens.com

Gadens Helping businesses like InterOil turn prospects into real projects in Asia Pacific For over 45 years our lawyers have partnered with industry leaders like InterOil to help them navigate the legal and regulatory environments of Asia Pacific.

Ian Clarke National Chairman T +61 2 9931 4722 E ian.clarke@gadens.com www.gadens.com

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HIGH ARCTIC

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igh Arctic Energy Services established operations in Papua New Guinea in 2007 where it currently operates heli-portable drilling rigs, hydraulic workover rigs, mobile camps, conducts logistics services and operates a fleet of cranes, loaders, forklifts and Durabase mats.

From humble beginnings as a service company in the Canadian Oil and Gas industry, High Arctic has grown to become a leading provider of services in the world’s most challenging environments. High Arctic has always believed that every challenge has a solution and no problem is too difficult.

In January 2014 High Arctic mobilised its first drilling operation to InterOil’s operation in the Gulf Province of PNG. The results included a new discovery at Raptor and increase to the reserves estimate of the world class Antelope field. The company is excited to be playing a part in the ongoing growth of InterOil to whom it has become the major supplier of drilling services.

InterOil’s Wahoo drilling site in Papua New Guinea

across its licences and has compiled the largest seismic data set of any company in the basin, giving it an unparalleled understanding of the area’s geology.

“The Company will hold its licences for up to 11 years and is presently high-grading more than 35 prospects to complement the country’s most active exploration programme, which includes three to four wells this year,” Nador further notes.

Exploring and producing

Regarding Elk-Antelope specifically, a recent meeting of the European Association of Geoscientists and Engineers led to the project being described as the world’s most significant discovery in fold and thrust belts, as well as Papua New Guinea being labelled as having the most promise globally for a large oil discovery.

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The Company will hold its licences for up to 11 years and is presently high-grading more than 35 prospects to complement the country’s most active exploration programme, which includes three to four wells this year

Last year High Arctic committed to the importation of additional high-tech heliportable drilling rigs. The first of these rigs commenced drilling operations for InterOil in June 2015 and the second rig is will arrive in PNG in Q3 2015. High Arctic also provides Durabase® mats to help InterOil conduct work in the high rainfall environment. Specifically formulated from high performance thermos-plastic, Durabase® mats provide for a strong, durable, uniform surface; perfect for access to special environments, the stabilisation of heavy equipment or ground protection.

High Arctic is proud to operate and be a substantial employer in PNG. At High Arctic we value: • Community – We respect the people and places where we work.

• Trust – We do what we say.

• Challenge – We strive for superior solutions.

• Teamwork – We achieve more together.

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Alongside InterOil and Total in helping to realise this potential, Australian company, Oil Search has also been exploring and producing in the country for more than 80 years, currently operating all of Papua New Guinea’s producing oil fields.

As a partner in both the PNG LNG and Papua LNG projects, Oil Search has drilled more than 40 development wells in Papua New Guinea since 2003, enjoying a success rate of more than 85 percent and adding more than 50 million barrels of oil to expected ultimate recoveries.

More than 50 percent of Oil Search’s oil production now comes from wells drilled in the past six years.

On the LNG front, the Elk-Antelope venture has started basis-of-design for the Papua LNG Project and Total expects a final investment decision in 2017 with a view to first gas production in 2022.

World’s biggest demand

At its peak, the PNG LNG project employed almost 22,000 people and Papua LNG is expected to generate similar employment opportunities in the region despite the demand for onshore labour being substantially less as a consequence of it being closer to the coast.

The plus side of this new location is the relative ease of access to its core Asian customer base for LNG projects; less than 10 days’ sail away as a comparative advantage over Pacific Basin competitors.

Papua LNG sits on the doorstep of the world’s biggest market with China and Japan already major longterm LNG customers for Papua New Guinea.

China’s LNG demand is expected to double by 2020, according to Wood Mackenzie analysis, just as LNG contracts into Asia need to be renegotiated.

“Japan, the world’s single biggest LNG importer at about 100 million

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A driller operating a rig at InterOil’s Raptor discovery in Papua New Guinea

InterOil’s Triceratops gas field in the highlands of Papua New Guinea

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tonnes a year, expects demand growth to continue, particularly as it grapples with the political implications of returning to full-scale nuclear energy,” Nador adds. “As an illustration of the scale of Japan’s demand, the country consumes about nine trillion cubic feet of gas a year, or the equivalent of one PNG LNG Project each year.”

Even further demand in the Asian energy sector is expected over the next two decades as a consequence of the growing middle-class which is expected to triple by 2030 to around 2.5 billion people; all contributing to the likelihood that global demand for LNG will outstrip supply in the coming years.

Investing in Papua New Guinea

The Elk-Antelope project may well be coming on stream just in time to help tackle this shortfall; a realisation which the Papua New Guinea Prime Minister has echoed in iterating how important this second LNG project will be in catalysing an economic boom.

According to the Asian Development Bank, economic growth in the country rose to eight percent in 2014 following the first exports of LNG and is expected to rise to 15 percent in 2015, to give Papua New Guinea one of the highest growth rates in the world while also opening up numerous opportunities for the country’s population.

During a recent trade visit to the UK, Belgium and France, Mr O’Neill emphasised that job creation was a key motivator of his country’s engagement with European businesses in particular.

“There is significant interest in Papua New Guinea from the business community and we must convert that interest into tangible business engagement,” he said. “We cannot think of Europe as being too far away to matter.

“Europe offers an important market, particularly for our agricultural

15% Expected rate of growth in Papua New Guinea in 2015 from LNG exports

InterOil’s Elk-Antelope gas field in PNG (from left): Wapu Sonk, MD, National Petroleum Company of PNG; Dr Michael Hession, CEO, InterOil; Nixon Duban, PNG Minister for Petroleum and Energy; Philippe Blanchard, MD, Total PNG; Chris Finlayson, Chairman, InterOil

The country’s population is set to benefit from PNG’s LNG potential

products and there is tremendous potential for strategic partnerships in areas that include banking, energy and resources.”

Total’s role within this intercontinental development will be pivotal as InterOil, Oil Search and Papua New Guinea as a whole, look to capitalise on the possibilities that LNG can still generate for the nation over the coming years.

“In my meeting with senior executives at Total SA, they reaffirmed their commitment to developing LNG in Papua New Guinea,” Mr O’Neill concluded. “Total is a great example of a European company that recognises the potential for investment in Papua New Guinea.

“Total is already employing Papua New Guineans and foreign workers and this number is expected to reach 10,000 at the peak of the construction project.

“With one of the fastest growing economies in the world and being a country with ongoing political stability, businesses are interested in investing in Papua New Guinea.”

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InterOil Corporation head office: InterOil Singapore Pte Ltd 163 Penang Road #06-02 Winsland House II Singapore 238463 T: +65 6507 0200 F: +65 6507 0249

www.interoil.com