A Review of the Nigerian Energy Industry

Shell, Sinopec may buy Australian LNG – JPMorgan

06 February 2013, Sweetcrude, Lagos – Royal Dutch Shell Plc, Europe’s largest oil company, and China Petrochemical Corporation are possible buyers of a stake in a A$23 billion ($24 billion) liquefied natural gas project in Australia, JPMorgan Chase & Co. said.

Shell, through its Arrow Energy Ltd. venture with PetroChina Co., may bid for a stake in the Australia Pacific LNG project being built by ConocoPhillips and Origin Energy Ltd. (ORG), Jason Steed and Christopher Laybutt, Sydney-based analysts at JPMorgan said yesterday in a report.

ConocoPhillips and Sydney-based Origin are developing the APLNG venture in Queensland state, one of seven projects going ahead in Australia to tap Asian demand. Origin has said JPMorgan was hired for the sale, which would help fund the project, and that the process will last through the first quarter.

If Origin successfully sells a 7.5 percent stake, its “capital position will be dramatically improved” by about A$2 billion, the JPMorgan analysts said.

China Petrochemical, known as Sinopec Group, already owns 25 percent of APLNG, leaving Origin and Houston-based ConocoPhillips (COP) with 37.5 percent each. Origin said in July that it’s looking to keep about 30 percent of the project after the partners jointly agreed to further cut their stakes.

Lv Dapeng, Sinopec Group’s Beijing-based spokesman, didn’t answer calls to his office today seeking comment. A call to Shell’s Australian media line wasn’t immediately returned.

Origin has sufficient funds to meet its share of APLNG to 2015 and to “support the ongoing needs of the business,” the company reiterated today in an e-mailed response to questions.

While a failure by Origin to reach an agreement to reduce its project ownership will “undoubtedly dent sentiment,” it won’t necessarily prompt the company to sell shares to raise funds, according to the analysts at JPMorgan, who also named infrastructure investors as potential buyers.

Origin, Santos Ltd. (STO) and BG Group Plc have approved construction of three LNG plants in the state. Shell said in November it may delay until 2014 a decision on whether to go ahead with the Arrow venture amid rising costs in Australia.

Shell has slowed the pace of developing new LNG projects in Australia “where there is cost inflation pressure,” Chief Executive Officer Peter Voser told investors on a call yesterday. The company is taking more time on an expansion of the Gorgon LNG project operated by Chevron Corp. off the northwest coast and on Arrow, he said.

Shell was studying plans to combine its Arrow gas resources with third parties, Andy Brown, director of international production, said in November.

“We see a potential transaction with Arrow as adding the most project value,” David Leitch and Andrew Moller, Sydney- based analysts at UBS AG, said yesterday in a report.

Sovereign wealth funds, national oil companies or LNG buyers in Japan, India, Thailand or Chile also may want to acquire a 15 percent interest in the APLNG development, Mark Wiseman and Anthony Ta, Sydney-based analysts at Goldman Sachs Australia Pty, wrote in a Nov. 26 report.

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