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Ground broken on Wheatstone
PetroChina joins Shell in $3.3bn bid for Arrow Energy
OIL giants Shell and PetroChina have made a combined $3.3 billion bid for Queensland coal seam gas producer Arrow Energy as consolidation in Gladstone’s burgeoning export liquefied natural gas industry steps up.
Arrow shares surged as much as 47.4 per cent to a record $5.13 when the $4.45 a share bid, which does not include Arrow's overseas assets, was revealed today.
The bid, which was described by Arrow as a "non-binding indicative and conditional proposal", was a at a 28 per cent premium to Arrow's Friday closing price.
Arrow shareholders would also receive a share in Arrow's international business, which the company is planning to float in Hong Kong or Singapore.
By early afternoon, Arrow was up $1.62, or 47 per cent, at $5.06 compared with a 0.9 per cent rise in the benchmark S&P/ASX 200 index.
The joint bid, said to be half each from the two oil giants, comes as Arrow is preparing to buy the $2bn Fisherman's Landing LNG project, touted to be the nation's first CSG-to-LNG operation, from LNG Ltd.
Shell owns 30 per cent of Arrow's CSG ground and is planning its own LNG plant on Curtis Island off Gladstone.
Shell confirmed it was in discussions to acquire Arrow, excluding the international assets, of which it already has a 10 per cent stake.
Citi and UBS are advising Arrow on the deal. Arrow has advised shareholders to take no action on the bid.
The involvement of PetroChina -- China's largest-listed oil company by capacity -- could create a political hurdle for the bid considering the Australian government has taken a cautious stance on the issue of Chinese entities buying Australian resource producers.
China would not have a controlling stake in the gas fields or the LNG project.
This is the second attempt by Shell to gain control of Arrow with Shell's initial offer, never confirmed by either party, made last year.
A successful bid could give Shell's plans to build a standalone terminal at Gladstone port in Queensland a shot in the arm.
The proposed plant would produce 16 million tonnes a year of LNG, with first gas targeted in 2014 or 2015, but the Anglo-Dutch major doesn't have enough gas under its control at present.
Coal seam gas -- trapped stores of methane hundreds of metres below the Earth's surface -- is one of the world's hottest energy plays.
More than $20bn was spent in 2008 on deals in Australia alone by companies including Shell, US producer ConocoPhillips and Britain’s BG Group.
This activity reflects shrinking access that Western companies have to conventional natural gas reserves elsewhere in the world, as major gas producers such as Russia and Qatar favour production by local state-owned firms.
Environmental benefits are also playing a part in fuelling investment as coal seam gas doesn't produce any sulphur dioxide or particulates, and emits only 50 per cent of the carbon dioxide emitted when coal is burnt.
Monday 8 March, 2010
Bloomberg
Monday 8 March, 2010
Bloomberg
