Refinery - Project Summary

The Investment Need for a Refinery in Papua New Guinea

InterOil was formed in 1997 with its principal intention being to build and develop an vertically integrated oil and gas company in Papua New Guinea. The recently constructed InterOil refinery is the only petroleum refining facility in Papua New Guinea and produces a range of products that are used to supply the entire domestic refined product needs in Papua New Guinea. All products surplus to Papua New Guinea’s domestic needs are exported.

Prior to the construction of our refinery, Papua New Guinea was one of a few oleiferous countries that did not have its own refinery and relied entirely on imported petroleum refined products from Singapore and Australia, a distance of 1,375 - 4,375 miles.

InterOil’s Project Agreement with the State of Papua New Guinea enables the refinery to market its domestic sales at the Import Parity Pricing structure which allows us to capture most of the freight costs and refinery margins, which were previously paid to international shipping and oil companies.

State support for the project

InterOil has a Project Agreement and Extension Deed with the State of Papua New Guinea which ensures that the domestic distributors purchase all of their petroleum products from the refinery at the Import Parity Price. No dumping of cheaper products is permitted.

The Import Parity Price is the price set by the Price Controller on a monthly basis. This calculation is virtually identical to the "landed Cost Review" that previously applied to the local distributors prior to the construction of the InterOil refinery. The Import Parity Pricing format was implemented in September 2004.

The InterOil refinery project is the single largest industrial investment project undertaken in PNG.

InterOil Management

The InterOil core project team consists of a highly experienced group of individuals each with extensive experience in their chosen fields and wide ranging contacts within the oil industry.

Due to the high level of confidence vested in the Directors and Management, InterOil has developed strong relationships with oil majors, Shell and BP. An amount of US$214 million was committed to the “Refinery Project” which includes a loan amount of US$85 million from the US Government Agency (OPIC) with which to complete the project. To date InterOil continues to deliver on its promise to the Government of PNG and the shareholders of InterOil.

The Refinery Description

The refinery’s nominal capacity is 32,500 bpd, sized to meet the current and predicted demand for the whole of the PNG market. The configuration that has been chosen takes advantage of the light sweet crude and so avoids the need for hydrotreating or complex and expensive heavy oil processing such as catalytic cracking and coking. The refinery thus consists of only atmospheric distillation plus a modest catalytic reformer for production of gasoline blendstock i.e. an ultra-simple hydroskimming complex.

The refinery site is situated in an area surrounded by hills, which shield the view from the city of Port Moresby, across the harbor. Several measures have been taken to minimize visual impact Great attention has been paid to environmental matters and InterOil has committed itself to meet or exceed the recommendations of the World Bank for new refinery installation.

Port Moresby has the only sheltered, deep-water harbor in the region. In fact, the harbor draft exceeds that of both Sydney and Brisbane. The refinery jetty design and deep draft of the harbor allows easy access to vessels of all sizes up 110,000dwt. Smaller vessels can also unload crude oil from the PNG river systems and unload at the refinery.