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China eyes stake in BG Australia LNG project

27th April 2012

Chinese investment manager, CIC is looking at buying a slice of UK company’s share in an Australian LNG plant

BG is among many global oil majors developing USD 200bn of LNG export projects in Australia

UK natural gas producer, BG Group Plc has held talks with China Investment Corp (CIC) on the sale of an equity stake in its Australian LNG facilities, sources familiar with the matter told Reuters. The deal could be worth USD 2 billion.

BG and CIC started discussions about two months ago, one of the sources said, although it was not clear whether the USD 410 billion sovereign wealth fund's interest was still active.

The first round of bids is due in early June, the sources said.

Others in the fray include China's CNOOC Group, which owns a 5 per cent stake in the project, Osaka Gas Co Ltd, Tokyo Gas Co Ltd, Mitsui & Co Ltd, Marubeni Corp and Qatar Petroleum, the sources said.

They declined to be identified because the talks are confidential.

BG is among many global oil majors developing USD 200 billion of liquefied natural gas export projects in Australia. Developers such as the British company are shedding some stakes to free up cash for other projects.

BG, which owns a 93.75 per cent stake in the USD 15 billion Queensland Curtis Island LNG project, is offering a 15-20 per cent stake, sources previously told Reuters. The stake could be worth up to USD 2 billion, they said.

BG had initially planned to sell an equity stake in the project and also to offer the buyer a long-term gas off-take agreement. Under the revised deal, BG has dropped the off-take agreement, said the sources.

They said BG would discuss off-take agreements only after the equity was sold, and the off-take would most likely be offered when the project's capacity expands.
Separately, a source at a Japanese LNG buyer said gas users, in general, would not be interested in taking a stake without an off-take gas agreement.

"They need to justify an investment, and that would apply if they have a purchase agreement at the same time," the source said.

The Curtis LNG project has a capacity of 8.5 million tonnes a year in the initial stage, with the first delivery slated for 2014. It can be expanded to 12 million tonnes a year, the project website showed.

In a similar deal, Australia's Woodside Petroleum is looking to sell down its stake in the Browse LNG project.

Historically, utility companies seeking secure and uninterrupted supply of gas have scooped up such stakes, but their interest in this process may be limited due to the new deal structure, sources said.

Still, China's CNOOC Group, Osaka Gas, and Tokyo Gas are showing interest, they said.

"BG Group keeps all the assets in its global portfolio under review and we keep all options open. Nothing is sacrosanct," a London-based BG spokesman said.

"However, we do not speculate about what we may or may not do with the assets in our global portfolio," he said.

 

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