A Review of the Nigerian Energy Industry

Petronas ‘in talks’ for shale stake sale to Indian Oil

India shale gas policy10 July 2013, News Wires – Malaysia’s Petronas is in talks to sell 10% of its Canadian shale gas assets to refiner Indian Oil, according to a report citing sources with direct knowledge of the matter.

Such a deal would mirroring an agreement the East Asian state-run giant had previously signed with Japan Petroleum Exploration, Japex, Reuters reported.

Petronas last year bought Canada’s Progress Energy Resources in a C$6 billion ($5.67 billion) deal that gave it shale gas properties in north-east British Columbia.

In March, it sold a 10% stake in the integrated shale gas development and Pacific NorthWest LNG project to Japex. Financial details of that deal have yet to be revealed publicly.

Terms of a potential deal between Petronas and state-run Indian Oil have not yet been worked out, the sources told the news wire.

Indian Oil did not have immediate comment and officials at Petronas could not immediately be reached for comment, Reuters added.

“Petronas has not opened this to anyone else, it prefers to directly approach one company at a time,” said a source with direct knowledge of Petronas’ commercial strategy.

The source ruled out the sale of a stake to Chinese companies if a deal with India does not materialise.

China’s CNOOC Ltd completed a contentious takeover of Canada’s Nexen in February. Ottawa approved that deal only after making clear it would not allow foreign state-owned firms to build up dominant positions in the Alberta oil sands.

“One thing is for sure, Petronas will not go to Chinese companies if the India deal falls through, as Chinese companies are pretty active in the sector,” the person told Reuters.

Kazakhastan earlier this month blocked India’s plan to buy ConocoPhillips’ stake in giant Kashagan oilfield for $5 billion, and sources said China could win the same stake for $5.3 billion to $5.4 billion.

Indian Oil, the country’s biggest refiner, wants to expand its portfolio of exploration and producing assets while Petronas wants to share some of the costs of getting into the Canadian shale sector and bringing in cheaper LNG supplies from North America to energy-hungry Asia.

Indian Oil is likely to choose an investment bank advisor soon, two banking sources told the news wire.

One banking source competing to represent Indian Oil on the transaction said a deal was likely to include a “long-term attractive offtake” agreement for gas.

The Canadian unit of Petronas earlier this month sought approval for LNG exports from Canada’s Pacific Coast.

India last month decided to link prices of locally produced gas with global benchmark, paving way for a rise in prices from April 2014 and making LNG imports attractive.

– Upstream.

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