Papua New Guinea: The muscle of Shell will dramatically enhance the project's chances of getting across the economic and financial line.
Australian Financial Review, Friday April 23
By Ian Howarth
Woodside, controlled by Shell, joins Oil Search in Papua New Guinea pipeline.
Woodside Petroleum has confirmed it will join Oil Search
Ltd in the Papua New Guinea to Queensland gas pipeline
by taking a $118 million placement of shares at $2.10 each,
a substantial premium to yesterday"s closing price of $1.92.
Woodside will emerge with 12 per cent of Oil Search in
what marks the company"s first major corporate move to
expand away from its heavy reliance on Australia"s North
West Shelf.
The placement will also entitle Woodside to a seat on the
Oil Search board, although the deal remains subject to Oil
Search shareholder and Bank of PNG approval.
That approval appears to be a formality as the deal is
believed to have received the strong backing of PNG
Mines and Energy Minister and former prime minister, Sir
Rabbie Namaliu.
Woodside"s managing director, Mr John Akehurst, said:
"We are delighted that an agreement has been reached."
The two companies looked forward to working closely
together, Mr Akehurst said in a statement.
Oil Search managing director Mr Peter Botten yesterday
welcomed the Woodside investment in Oil Search.
He said the Woodside investment was a ringing
endorsement of the project.
"We think that the fact the deal puts a substantial amount
of money into the company and provides a strong technical
back-up to our strengths is a strong endorsement of the
project."
Mr Botten also noted that the deal must now silence any
remaining sceptics about Oil Search having the financial
and technical capacity to participate fully in the gas
pipeline project.
The Woodside deal has significantly enhanced the
prospects of the gas pipeline project now proceeding.
If the PNG to Queensland gas pipeline can find enough
customers to get over the line, Australia"s gas industry will
be revolutionised.
The addition of Woodside and, by extension the
international muscle of the Royal Dutch Shell group, into
the joint venture will dramatically enhance the project"s
chances of getting across the economic and financial line.
Woodside"s move towards 12 per cent of Oil Search is
widely seen as the beginning of steps to take a much
larger position, but Mr Botten was coy on any extension of
Woodside"s interest.
He likened Oil Search"s position to Woodside"s
relationship with Shell.
Shell owns 34 per cent of Woodside, but Woodside stands
as a fiercely independent company while still benefiting
from the technical and financial strengths of the larger
group.
Sir Rabbie Namaliu said this week the only way Oil
Search could be taken over would be in a friendly merger
deal.
The PNG Gas pipeline project was originally conceived
and developed by Chevron and its partners, Mitsubishi,
Mobil Exploration and Producing Australia, Oil Search,
Orogen Minerals and Petroleum Resources Kutubu Pty
Ltd.
AGL Ltd has been selected to lead the gas marketing
operations of the project which have now entered a critical
phase as the project tries to secure sufficient customers to
make the project viable.
A joint venture of AGL and Petronas was chosen last year
to build, own and operate the Australian portion of the
pipeline.
Last week Oil Search signed an agreement with Esso in
which Esso"s share of gas from the Hides field would be
made available to the PNG gas project, should appropriate
commercial terms for gas contracts be agreed.
Now Santos has also fallen in with the project, ensuring
plentiful gas reserves to satisfy the largest likely gas
contract.
The deal ensured that gas from the two largest fields in
PNG was now available.
The managing director of Oil Search, Mr Peter Botten,
said the addition of gas reserves from Hides was sufficient
to sustain the project for at least 30 years.
"This project is highly complex, involving two countries,
various states and provinces and a diverse group of
stakeholders.
"Resolution of the reserve issue and the ability to now
finalise market and customer arrangements represents a
major step for us all."
afr.com.au
_________________________________________
Strategy in two parts to shift focus
Australian Financial Review, Friday April 23
Comment by Ian Howarth
Woodside has dealt itself into the Papua New Guinea to
Queensland natural gas pipeline and cemented itself a
place in the east Australian gas industry.
Woodside"s move to expand into the eastern seaboard gas
market is the result of a two-pronged strategy the
company has developed to expand its business away from
the North West Shelf and other operations in that region.
The next likely step is a direct acquisition of an interest in
PNG"s Kutubu project, which lies at the core of the
pipeline project.
BHP holds a 9 per cent stake in the Kutubu field and,
according to BHP Petroleum"s chief executive this week,
it"s for sale to anyone who meets BHP"s price
expectation.
In the past week the future of the PNG to Queensland gas
project took a major step forward when more gas reserves
from the Hides field were committed to underpin the
project.
First Exxon assigned its gas reserves to Oil Search, then
Santos offered its support as well.
But it is Santos which can feel the boa slowly tightening
around its corporate neck as Woodside and others begin to
make inroads onto its traditional gas patch.
After years of strangling high-priced gas deals out of east
coast gas users, Santos is now feeling the pinch of
competition for the first time.
Gas prices will inevitably fall as PNG gas comes into
Queensland and moves further south ~ and when Duke
Energy completes its gas pipeline from Bass Strait to
Sydney in time for next year"s Olympics, Santos" Ross
Adler will have to have put a whole new gas marketing
strategy in place.
For years Santos, aided and abetted by the South
Australian Government, simply bought out its opposition,
but now it is forced to make different moves.
First Santos bought 25 per cent of Hides, then took an
interest in the Kipper gas field in Bass Strait.
Woodside, however, appears to have outmanoeuvred
Santos this time by joining up with Oil Search.
afr.com.au
________________________________________
PNG pipeline project: Woodside pumps $118m into Oil Search
The Age, Friday April 23
By BARRY FitzGERALD
Woodside Petroleum has accelerated its diversification away from
the North-West Shelf gas project by pumping $118 million into Oil
Search in return for a 12 per cent stake in the group, a key
partner in the planned $US3.5 billion ($A5.4 billion) Papua New
Guinea-Queensland gas project.
The move follows weeks of speculation that Woodside was
poised to make a $1 billion-plus bid for Oil Search.
But that speculation ignored the political sensitivities of the
PNG-incorporated Oil Search falling to a foreign raider and the
financial risk in bidding ahead of a development commitment being
made to the PNG-Queensland project, one that will link big gas
fields in the PNG highlands to customers in Queensland via a
2500-kilometre pipeline.
Woodside has taken up 56.4 million Oil Search shares (12 per
cent) at a price of $2.10 each - a premium of 18 cents, or 9.3 per
cent, to yesterday's closing price for Oil Search of $1.92. When
added to on-market purchases that it is yet to confirm, Woodside's
stake in Oil Search is believed to be closer to 15 per cent, making
it the biggest shareholder in the PNG oil and gas producer.
Woodside, controlled by Shell Australia, has the stated goal to
build a new core business in Australia and to supply gas to eastern
states markets.
While it has been stalking Oil Search, Woodside has also been
planning its entry into the Bass Strait gas fields, at present
monopolised by the Esso/BHP joint venture.
It recently reached agreement to acquire 20 per cent of the big
but undeveloped Kipper gas field in Bass Strait. Shell also has 20
per cent and has said it wants the Woodside/Shell alliance to
replace Esso as operator of a likely $500 million development of
the field.
Analysts said yesterday that a key motivation of Woodside's move
on Oil Search was a need by the group to secure additional
earnings growth beyond those to come with first production later
this year from the $1.3 billion Laminaria oil development on the
North-West Shelf.
The pressure on Woodside to secure a new earnings stream has
been increased by slower-than-expected growth of liquefied
natural production from its one-sixth owned North-West Shelf
project.
Japanese buyers of the LNG have yet to commit to the additional
tonnages needed to underpin a planned $6 billion doubling in LNG
capacity, with the Asian economic demand checking LNG
consumption growth rates.
Oil Search said funds raised would be used to reduce debt and to
fund its ''expanding role in the development of the
PNG-Queensland gas project''.
That project gained fresh momentum recently with the deal to
include Exxon's share of gas from the Hides gas field in the
project's resource base, allowing the Chevron-led joint venture to
now convert letters of intent to buy from Queensland customers
into sales contracts.
The clincher for the PNG-Queensland pipeline will be a deal to
supply a new alumina refinery at Gladstone proposed by Comalco.
But despite $200 million in financial inducements from the State
and Federal Governments, the Rio Tinto-controlled aluminium
group has yet to commit to the refinery.
theage.com.au |
