Wednesday, December 23, 2009

Hungarian socialist (Soros) makes the Exxon-XTO deal ever more interesting (XOM, XTO, IOC)

Fascinating. I wrote a week(ish) ago about a wrinkle that could trip up the Exxon-XTO merger.

The merger terms cited the risk of legislation that would outlaw "fracturing," which is a process used to extract natural gas from shale-rock formations. The deal was a big bet by Exxon on not only the current low price of natural gas, but on America as a source of cheap, cleaner fossil fuels. XTO's expertise in fracturing as a way to get at natural gas reserves was a large part of the deal rationale. Per the merger agreement, legislation outlawing fracturing would be reason for the deal to fall apart, as it would constitute a "material adverse affect:"

Today another natural gas company - InterOil (IOC), announced a huge deal with the government of Paupa New Guinea to build a $5billion LNG facility:

"Following approval of the Project Agreement by the National Executive Council on December 10, the Minister for Petroleum Hon William Duma and acting Governor-General Dr Allan Marat signed the Agreement securing PNG's second LNG project. The signing was witnessed by the Prime Minister Sir Michael Somare. The Agreement sets fiscal terms for a twenty year period, which include a 30% company tax rate and certain exemptions applicable to large scale projects of this nature. It also provides for a 20.5% ownership stake to be held by the Government of Papua New Guinea's nominee, Petromin PNG Holdings Limited. A further 2% ownership stake will be taken by landowners directly affected by the plant.
As previously announced, the proposed LNG project would be developed by InterOil and its joint venture partners Pacific LNG Operations Ltd. and Petromin PNG Holdings Limited. The project targets a $5 to $7 billion LNG facility, with multiple trains. Additionally, the Agreement provides for the expansion of the plant up to 10.6 million tons per annum (mmtpa). While current plans call for first production of LNG towards the end of 2014 or beginning of 2015, InterOil is progressing a proposed liquids stripping plant, to be located in Gulf Province, in late 2011/early 2012, which would provide an attractive revenue stream prior to the commissioning of the LNG plant."
So why do I mention the fracturing litigation in the same piece as InterOil's announcement? Because as Investor's Business Daily points out, InterOil's largest shareholder is the "man behind the curtain" in funding the anti-fracturing legislation. Hungarian billionaire George Soros' fund owns 12% of InterOil. From his fund's most recent 13F-HR filing:

He also is close to the people who funded the supposed "investigative journalism" outlet ProPublica, an outfit that claims to fight for the US citizen. What they've done is paint fracturing as a dangerous process that threatens our groundwater, when in effect it is a baseless argument. Baseless or not, congressmen are notoriously stupid individuals who are happy to pass reckless legislation in exchange for promises or hints of campaign cash. IBD points out Soros' involvement with ProPublica, as well as his interest in InterOil, which would compete directly with XTO.
A media group called Pro Publica has done what it calls "investigative journalism" and exposed the alleged dangers of fracking in a series of stories it has provided free to cash-starved media outlets and newspapers. The first expose was an attack on energy companies developing the Marcellus Shale.
Pro Publica was started by billionaires Herbert and Marion Sandler, who, along with billionaire George Soros, funded the left-wing Center for American Progress, run by John Podesta and touted as the Obama administration's "idea factory."
Soros owns a major stake in a company called InterOil, a company that has discovered a large natural gas field in Papua, New Guinea, with which American shale resources would compete.
Soros would rather have us import his liquefied natural gas than develop our own. His allies in the media, the environmental movement and the Democratic caucus are all too eager to exploit public fears to do it.
Roger Willis owns a hydraulic fracturing company in the Pennsylvania town of Meadville. He says thousands of frack jobs have been done in rock formations above and below the Marcellus Shale in New York state with no aquifer damage.
"This 60-year-old technique has been responsible for 7 billion barrels of oil and 600 trillion cubic feet of natural gas," according to Sen. James Inhofe, ranking member of the Environment and Public Works Committee. "In hydraulic fracturing's 60-year history, there has not been a single documented case of contamination."

So it turns out that fracturing is NOT a danger to US groundwater, but instead it is a threat to Soros' investment in InterOil. He is funding attacks on the fracturing process in an attempt to derail the Exxon-XTO deal, which would enrich himself through his InterOil investment. All while getting US environmentalists to lead the charge in scuttling a US energy deal in order to simply outsource our LNG demand.

Copyright 2009 AlphaNinja

1 comment:

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