Kerogen enters PNG LNG space

The oil and gas major announced last week that it has completed a 292-kilometer section of pipeline between the Southern Highlands and the coast. It is a key milestone for a project that is set to deliver its first LNG cargo in 2014.

The payoff on the $19 billion investment in the project's initial phase is the 9 trillion cubic feet of gas that will be sold over its lifetime. Long-term supply contracts have already been signed with several Asian energy companies.
ExxonMobil's efforts also underpin the investment thesis for other players seeking a portion of PNG's gas reserves.

These include Kerogen Capital, a PE firm set up by former executives from J.P. Morgan's Asia energy and natural resources team who previously co-founded Indonesia's Ancora Capital. It recently announced a A$30 million ($27 million) investment in Twinza Oil which, among other assets, holds a 90% interest in a shallow water gas and condensate appraisal project in the country.

"PNG LNG projects are expected to produce some of the most attractive returns amongst new-build LNG projects globally. With PNG LNG starting gas sales in 2014, together with plans for further trains and new competing LNG projects, upstream gas resource aggregation is now an attractive opportunity" says Jason Cheng, co-founder and managing partner at Kerogen. "Recently, there have been a series of significant deals announced in PNG from majors, independents and junior oil and gas companies."

Kerogen will take a 29% in Twinza, which is controlled by the Clough family, founders of Clough Engineering, an engineering, construction and support services provider for resource projects in Australia and PNG.

In addition to the PNG gas, Twinza's portfolio includes a 100% operating interest in a licence in a high potential oil and gas shale play in Queensland; and a 50% interest in two onshore exploration blocks in an extension of a gas-producing basin in north-central Thailand.

For Kerogen, though, the attraction is the management team as much as the assets it controls. "We invest in teams and platforms that have potential to grow and develop. The Twinza team has been operating in the region for decades and has a successful track record of discovering and commercializing assets in the region," says Cheng. "We see significant potential to further develop the portfolio together with the management team."

The investment is smaller than Kerogen's average check size - $100-150 million - but this reflects the current size of the Twinza platform, not its growth potential. Further commitments are expected from Kerogen and other investors as the individual projects ascend the development curve.

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• Topics
• Expansion
• Industrials
• Southeast Asia
• Australasia
• Commodities
• energy
• Southeast Asia
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• Kerogen Capital
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