Is a Total Oil takeover Papua LNG’s missing puzzle piece?

There are new murmurs about a possible takeover of Oil Search by Total, less than three weeks after Oil Search revealed it was officially in discussion with ExxonMobil and Total SA. Could this be the momentum needed to get Papua New Guinea’s long-awaited new LNG project started?

The move seems logical for Total, an international giant with a market capitalisation in excess of $100 billion. Oil Search’s experience in PNG and access to existing infrastructure make it an obvious takeover target and allow for a reduction of more than USD$100 million in operating expenditure per year.

However, the rumours are that any potential acquisition will hinge on the retirement of Peter Botten, Oil Search’s current CEO. Another factor holding back a bid may be Total’s recent acquisition of Maersk Oil for USD$7.5 billion. That kind of outlay and the associated paperwork may hold up the move, despite the arguments ?for? beginning to stack up.

 

The company’s half-yearly report states that their discussions with Total ?include establishing integration principles, including capacity and cost sharing, the optimal commercial model for asset ownership and financing.?

If you?re not convinced that this would be a reasonable move for Total right now, compare their current share price and market cap in comparison to the levels we saw during the peak of PNG’s oil and gas boom. 

At the business breakfast at the PNG Chamber of Commerce earlier this year, Total’s Managing Director Philippe Blanchard made it clear that Total would not be pushed for dates. But with the signs pointing starting to point towards a possible takeover, is it too optimistic to expect a Final Investment Decision (FID) in the next 18 months? 

In my opinion YES, it is on the optimistic side. If this takeover is on the cards, this (coupled with the Maersk deal) could push the FID out even further. What’s your take?

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