Royal Dutch Shell PLC (RDSB.LN) is in talks with liquefied natural gas producer InterOil Corp. (IOC) that could lead to the Anglo-Dutch energy giant buying into the U.S. firm's Papua New Guinea exploration license areas, Shell's two most senior executives said Thursday, although neither was prepared to be drawn on where discussions may lead.
"We have been in talks with InterOil and other interested parties, but we can't say where [they are] going," said Chief Financial Officer Simon Henry.
Papua New Guinea-focused InterOil holds three prospecting licenses onshore the south-east Asian island nation, where early appraisal drilling has revealed vast natural gas reservoirs are located.
The firm also plans to build a 9 million metric ton a year LNG terminal in Papua New Guinea but will need partners to help cover some of the estimated $6 billion required to build a two-train processing plant.
It is currently soliciting interest in the sale of a 25% stake in the LNG project.
Shell Chief Executive Peter Voser skirted a question on whether Shell was preparing a takeover bid for the Houston, Texas-based firm. Shell recently pulled out of a bidding war for Mozambique-focused prospector Cove Energy PLC (COV), citing the high cost of the acquistion relative to other growth opportunities within its existing business.
"It's an interesting play there," said Mr. Voser. "We have talked to the government, we are looking at it," said Mr. Voser, adding that any decision on investing in Papua New Guinea would have to be framed against its wider portfolio.
"At the end, it will be profitability driven. It will be: Can we do a project in a safe and reliable way, and will it deliver the performance? I think to answer that question, it is too early for that," said Mr. Voser.
InterOil wasn't immediately available for comment.
-Write to Alexis Flynn, firstname.lastname@example.org
Copyright (c) 2012 Dow Jones & Company, Inc.