BY TRAVIS HOIUM

SHARES OF InterOil fell as much as 24% today on concerns that Papua New Guinea may require the company to make major changes to its LNG project.

Comments made by the country’s Minister of Petroleum and Energy required a response from InterOil, who basically said its project plan meets a previous agreement.

The disagreement appears to be over the project’s size, which will be two million tons per annum and can be expanded to 8 mtpa. The government wants a project with production of 7.6-10.6 mtpa.

No one wants to pick a fight with a government that is an important partner, so the company must tread carefully.

A larger project would obviously require much more capital expenditure than the smaller project and be more risky for InterOil.

Right now, InterOil doesn’t appear to be making plans to change the project, but keep an eye on this going forward because it will have a big impact on the company’s cash flow.

Source: The Motley Fool, 27 September
http://www.fool.com/investing/general/2011/09/27/interoil-shares-got-crushed-what-you-need-to-know.aspx