Sarah Belfield - Reporter and writer, freelance

s a r a h b e l f i e l d

reporter & writer, freelance

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PNG PIPELINE BECOMES PIGGY IN THE MIDDLE

(Oil & Gas Gazette, April 2006)

THE tit-for-tat bidding game between AGL and Alinta has seen the Papua New Guinea to Queensland pipeline project caught in the crossfire, thanks to conditions Alinta attached to it scrip-based takeover offer for AGL shares not already owned.

Alinta wanted AGL to summarise for the market any buying or selling obligations outside of PNG pipeline commissioning that AGL was under, or to declare itself free of any such obligations.

Another condition was that before pipeline construction began, AGL had the right to terminate project agreements, or "elect not to fulfil its commitments", if it reasonably considered the project was not financially viable.

Alinta also wanted any liability or expenditure incurred for doing this capped at $20 million.

"Alinta wants to understand that AGL hasn't committed themselves to the construction of the PNG pipeline without proper sales contracts and financial viability of the project, and also that AGL hasn't committed to buying or selling PNG gas unless that pipeline is actually commissioned," Alinta chief executive Bob Browning told a media briefing held March 20.

"So we've got a very open mind about the pipeline — it's certainly strategically important, but we need to understand some of the details around the levels of commitment to that very expensive investment."

When asked whether AGL had disclosed any details at all about its PNG pipeline-related contracts to Alinta, Browning said AGL had not.

He confirmed that AGL's ASX announcement on the confidentiality agreement signed with Alinta had something to do with the PNG pipeline project.

"We certainly wanted to make sure that any information exchanged between AGL and Alinta was not of a commercially sensitive basis that would be exposed to the broader market, and certainly AGL I'm sure would have contracts within the PNG project that they wouldn't want the world to know about, beyond us. And likewise we have some."

"So, yes, that was one of many confidentiality issues that we were dealing with."

Browning was asked whether AGL had effectively refused to release PNG project details to Alinta.

"Yes — we would have liked to have had it be a bit more transparent between the two companies, but the information flow was pretty much one way."

That same day, AGL issued a public statement in response to Alinta's bid. In his reply, AGL chairman Mark Johnson said the bid was "highly conditional" and appeared to be "designed to frustrate" AGL's own bid for Alinta.

"It is difficult to take this bid seriously, given the number of broad-based and highly restrictive conditions which have been included," he said.

Johnson appeared to make no reference to the PNG pipeline project in his statement, other than to say, "... the [Alinta] bid has numerous conditions which require AGL to waive rights, take certain actions, provide undertakings or commercial information."

"As things presently stand we do not see how it would be in the interests of AGL shareholders to do any of these things."

In February, one of the project's main participants, Oil Search, announced the early sale completion of a 10% equity interest in the project to AGL. Included in the approximately US$427 million deal were interests in oil and gas reserves, and production and processing infrastructure.

An Oil Search presentation made a few days later said further conversions of conditional contracts to gas sales agreements were expected over the next few months. Conditional and firm contracts at the time totalled 196-268 petajoules per annum.

The aim of the PNG pipeline project was supplying natural gas from PNG to industry in Queensland. First gas was expected to be delivered in 2009.

s a r a h b e l f i e l d reporter & writer, freelance

About Services Clips Ideas Contact	Sample clip PNG PIPELINE BECOMES PIGGY IN THE MIDDLE (Oil & Gas Gazette, April 2006) THE tit-for-tat bidding game between AGL and Alinta has seen the Papua New Guinea to Queensland pipeline project caught in the crossfire, thanks to conditions Alinta attached to it scrip-based takeover offer for AGL shares not already owned. Alinta wanted AGL to summarise for the market any buying or selling obligations outside of PNG pipeline commissioning that AGL was under, or to declare itself free of any such obligations. Another condition was that before pipeline construction began, AGL had the right to terminate project agreements, or "elect not to fulfil its commitments", if it reasonably considered the project was not financially viable. Alinta also wanted any liability or expenditure incurred for doing this capped at $20 million. "Alinta wants to understand that AGL hasn't committed themselves to the construction of the PNG pipeline without proper sales contracts and financial viability of the project, and also that AGL hasn't committed to buying or selling PNG gas unless that pipeline is actually commissioned," Alinta chief executive Bob Browning told a media briefing held March 20. "So we've got a very open mind about the pipeline — it's certainly strategically important, but we need to understand some of the details around the levels of commitment to that very expensive investment." When asked whether AGL had disclosed any details at all about its PNG pipeline-related contracts to Alinta, Browning said AGL had not. He confirmed that AGL's ASX announcement on the confidentiality agreement signed with Alinta had something to do with the PNG pipeline project. "We certainly wanted to make sure that any information exchanged between AGL and Alinta was not of a commercially sensitive basis that would be exposed to the broader market, and certainly AGL I'm sure would have contracts within the PNG project that they wouldn't want the world to know about, beyond us. And likewise we have some." "So, yes, that was one of many confidentiality issues that we were dealing with." Browning was asked whether AGL had effectively refused to release PNG project details to Alinta. "Yes — we would have liked to have had it be a bit more transparent between the two companies, but the information flow was pretty much one way." That same day, AGL issued a public statement in response to Alinta's bid. In his reply, AGL chairman Mark Johnson said the bid was "highly conditional" and appeared to be "designed to frustrate" AGL's own bid for Alinta. "It is difficult to take this bid seriously, given the number of broad-based and highly restrictive conditions which have been included," he said. Johnson appeared to make no reference to the PNG pipeline project in his statement, other than to say, "... the [Alinta] bid has numerous conditions which require AGL to waive rights, take certain actions, provide undertakings or commercial information." "As things presently stand we do not see how it would be in the interests of AGL shareholders to do any of these things." In February, one of the project's main participants, Oil Search, announced the early sale completion of a 10% equity interest in the project to AGL. Included in the approximately US$427 million deal were interests in oil and gas reserves, and production and processing infrastructure. An Oil Search presentation made a few days later said further conversions of conditional contracts to gas sales agreements were expected over the next few months. Conditional and firm contracts at the time totalled 196-268 petajoules per annum. The aim of the PNG pipeline project was supplying natural gas from PNG to industry in Queensland. First gas was expected to be delivered in 2009.
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