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MIM throws lifeline to PNG gas pipeline
By Geoff Hiscock
SYDNEY, Australia (CNN) -- Diversified Australian miner MIM has given a potentially life-saving boost to the embattled Papua New Guinea gas pipeline project, agreeing to take a 20-year gas supply from 2007. MIM made a conditional commitment of 25 petajoules of gas a year over 20 years, to service its proposed zinc refinery at McArthur River in the Northern Territory. MIM and the pipeline project operator, ExxonMobil subsidiary Esso Highlands Ltd., said Sunday that final terms were conditional on both the zinc refinery and pipeline proceeding. The future of the $3.4 billion pipeline from the Papua New Guinea highlands to the Australian eastern state of Queensland took a heavy blow last week when Australia's biggest gas retailer, Australian Gas Light Co. (AGL), opted to source gas elsewhere. (Full story) AGL became a founding customer for the PNG pipeline project in March 2002 on the expectation that other customers would come forward. But AGL said last Wednesday that the delay in finding other backers meant it now had to look elsewhere to meet its Queensland customers' needs for gas from 2006. Other commitmentsAGL said instead it would commit to buy 1,408 petajoules of gas worth $2.5 billion over 15 years from separate Australian gas projects in Queensland, South Australia and off the coast of Victoria. Those projects are the BHP Billiton/Esso Gippsland Basin producers, the Santos-led Cooper Basin producers and the Origin Energy interests in the Surat/Bowen Basins in Queensland. Esso Highland president Bill Threlfall, who is also chairman of the PNG gas project owners group, said MIM's commitment was the group's first customer in the Northern Territory. He said negotiations were continuing with other potential customers in the Northern Territory and Queensland. The PNG project is thought to need at least 100 petajoules a year of customer commitments to go forward. Project participantsParticipants in the project are ExxonMobil (38.9 percent) as the operator, Oil Search (45 percent), Chevron Texaco (9.7 percent), MRDC (representing PNG landowners) with 3 percent and Japan PNG Petroleum (3.4 percent). There is a web of overlapping interests in the Australian gas production scene, with Exxon holding a stake in the Gippsland offshore field, and Cooper Basin operator Santos having a stake in Oil Search. MIM is one of the world's biggest coal exporters, and also produces copper, zinc and lead at its original Mount Isa mine in northwestern Queensland. It also holds 50 percent of the Argentine copper and gold mine Minera Alumbrera. (Full story) It has recently divested its European zinc smelters, and is expected to make a decision next year on the feasibility of refining zinc onsite at its McArthur River zinc/lead mine. Shares in MIM are 0.67 percent higher at A$1.51 in Monday afternoon trade. Oil Search, which tumbled 25 percent last week to A$0.60 after the AGL setback, is up more than 5 percent to A$0.62.
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