Things are heating up. Only to be expected as the other planned LNG project on Papua New Guinea run by Exxon/OilSearch, has already sold out and turned some customers down. Where do these go?
Energy giants to bid for US$500m gas project
CNOOC, PetroChina interested in PNG venture
China National Offshore Oil Corp and PetroChina are both planning bids for a stake in a natural gas project in Papua New Guinea owned by InterOil Corp, in a deal expected to fetch about US$500 million, market sources said.
Since Beijing typically allowed only one oil major to bid on any one project overseas, only one of the two companies was expected to gain approval to complete a bid or they could bid together, the sources said.
Thailand’s PTT Group was also among the parties angling for as much as a 35 per cent stake in the gas field development and terminal.
Cash-strapped InterOil is developing a vertically integrated energy business whose primary focus is Papua New Guinea and the surrounding region. Its assets consist of petroleum licences covering 1.86 million hectares, an oil refinery and retail and commercial distribution facilities, all in Papua New Guinea.
“I think the bigger, better, faster and stronger bidder is better positioned to win because that way, Inter-Oil gets a deeper pocket and can leverage a higher level of respect in the market,” said Curtis Trimble, an analyst at Natixis Bleichroeder.
A spokesman for CNOOC (SEHK: 0883), the parent of the Hong Kong-listed entity, and PetroChina declined to comment.
InterOil is seeking an equity investor after buying the stake from troubled investment bank Merrill Lynch, which was acquired by Bank of America Corp.
CNOOC signed an agreement in April to finance the Papua New Guinea government’s stake in the project but the announcement did not say if that accord included a stake. InterOil chief executive Phil Mulacek said the next round of discussions would be held by next month.
Beijing is trying to decrease its reliance on highly polluting coal, which accounts for 75 per cent of its energy production, by promoting the use of cleaner burning natural gas and alternative sources such as wind and solar energy. Currently, natural gas accounts for 3 per cent of total energy production and China intends to raise that to 8 to 10 per cent by 2020.
“China continues to build infrastructure but it is still insufficient to meet demand, so it is looking to sources from adjacent countries like Russia and from [liquefied natural gas] shipments abroad. But because global demand for LNG is increasing, China has a lot of competitors,” said Gideon Lo, an energy analyst at DBS Vickers.
Beijing announced last week that it was providing a US$4 billion loan to Turkmenistan for use in the country’s gas sector.
At the same time, Turkmenistan agreed to increase by 10 billion cubic metres a year the amount of gas it pumps to China in a pipeline connecting the two countries.
CNOOC started operations at China’s first LNG terminal in 2006 and a number more are planned such as two PetroChina, the Hong Kong-listed subsidiary of China National Petroleum Corp, is building that will come on line in 2011.
The mainland’s oil majors have been acquiring equity stakes in projects and buying gas to ensure supply. CNOOC owns a 17 per cent stake in the BP-led Tangguh LNG development in Indonesia, and in May the company agreed to buy 3.6 million tonnes of LNG each year for 20 years from the Curtis LNG project in Queensland, Australia.
In February, Exxon Mobil Corp agreed to sell PetroChina 2 million tonnes of LNG a year for 20 to 25 years from its Gorgon gas field in Western Australia. PetroChina also signed an initial deal last year to buy 3 million tonnes annually for 25 years from Qatar, and will buy up to 3 million tonnes a year from Australia’s Woodside Energy for up to 20 years.