The price that Indian Oil Corp is planning to pay for a 10% stake in Progress Energy Resources’ assets puts the value of the Canadian gas producer at almost double what Petroliam Nasional Bhd (Petronas) paid in 2012.
Last week, media reports highlighted that the state-controlled Indian Oil was close to acquiring a 10% stake in Petronas’ shale gas assets and proposed liquefied natural gas (LNG) facility, as well as a share of the future LNG production. These assets are owned by Progress Energy. In 2012, Petronas had fought hard to acquire the Canadian shale gas giant at a price of US$5.2bil.
Progress Energy was then a listed company in Canada, and Petronas had offered its shareholders a price of C$22 per share, which was at a hefty 90% premium over Progress’ share price at that time.
The total price worked out to US$5.2bil (RM16.02bil), and some quarters had questioned if Petronas was overpaying for such an asset.
The Indian deal, however, indicates that Petronas’ Canadian shale gas assets are now worth more than what the national oil corporation had paid.
The media reports on Indian Oil, however, stated that the deal needed the Indian cabinet’s approval, and that the matter was slated for discussion by ministers there last week.
If the sale goes through, it would mark the third sale of a piece of Progress Energy.-- Last year, Petronas had sold another two blocks of equity in Progress Energy’s assets to the Brunei and Japanese state-owned oil corporations, respectively. The sales were done at undisclosed sums (see table).
Reuters had reported last July that Petronas was in discussions with China Petroleum & Chemical Corp for a 10% stake in Progress Energy, but no announcement on this has been made yet.
“If the Indian deal goes through, then the total proceeds raised would make up a signification portion of the cost that Petronas had forked out for Progress Energy. These new shareholders will also be sharing in the capital expenditure needed for the production of the gas by Progress Energy.
“And the best part is that Petronas is still holding majority ownership of these assets,” pointed out an industry observer.-- He added that Petronas’ strategy worked well on two counts: one for reducing its cost, and second, for locking up demand of the gas to be produced by the Canadian gas fields of Progress Energy.
Petronas’ strategy is to ship the Canadian gas via tankers to meet North-East Asia’s soaring demand.-- The new equity partners will have to fork out their portion of the capital expenditure needed for the exploration, development and production of LNG.
After the sale to the Japanese and Brunei companies, Petronas holds a remaining 87% interest in Progress Energy’s assets.-- The sale to the Indians will bring this down to 77%, with sources saying that Petronas aimed to maintain its majority control of the asset.
“So, it’s left to be seen if Petronas would do another sale, although it still has the leeway to do so, as it only needs to keep 51% to ensure control,” said one industry observer.
Petronas remains a world leader in LNG technology. This largely stems from its experience in building its world-class LNG operations in Bintulu, Sarawak, since the early 1980s. Petronas is one of the world’s largest shippers of LNG.