The Texas-based explorer announced on Friday that it had selected French supermajor Total to partner in the major gas development planned for the fields.
Under the deal, Total will acquire a 61.3% stake in petroleum retention licence 15, containing the Elk-Antelope gas fields in the Gulf province of PNG.
It has also been granted an exclusive right to negotiate a farm-in to all of InterOil’s other exploration licences in the island nation.
InterOil said on Friday that the deal could be worth up to $3.6 billion.
“The transaction price depends on appraisal and certification of Elk-Antelope, with illustrative payments of approximately $1.5 billion – $3.6 billion, for a range of 5.4 trillion to 9.0 trillion cubic feet of hydrocarbon gas equivalent,” it said in a statement.
The transaction is expected to complete in the first quarter of next year, InterOil said.
The agreement comprises both fixed and variable resource-based payments. The fixed payments include: $613 million payable to InterOil on the completion of the transaction (anticipated in the 2014 first quarter); $112 million payable on a final investment decision for a new liquefied natural gas plant; and $100 million upon the first LNG cargo from the proposed facility.
The variable payments for amounts in excess of 3.5 Tcf of gas equivalent will depend on certification by two independent certifiers following up to three appraisal wells to be drilled in PRL 15.
Total will carry the cost of the appraisal drilling programme, as well as lead the construction and operate the proposed LNG project, which is subject to a final investment decision following reserves certification, basis of design and front-end engineering and design.
The appraisal drilling programme and certificate of the Elk-Antelope reserves is anticipated for completion in 2015.
InterOil chief executive Michael Hession said the agreement, which he described as “transformational” and “company-making”, was a key aspect to progressing development of the proposed LNG project.
Funds from the transaction are expected to go towards retiring debt, exploration and appraisal activities and to funding InterOil’s share of the Elk-Antelope development.