HONG KONG/SYDNEY, Apr 27: BG Group Plc has held talks with China Investment Corp on the sale of an equity stake in the British gas producer’s Australian LNG facilities, sources familiar with the matter told Reuters, in a deal that could be worth $2 billion.
BG and CIC started discussions about two months ago, one of the sources said, although it was not clear whether the $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 percent 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 as the talks are confidential.
BG is among many global oil majors developing $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 percent stake in the $15 billion Queensland Curtis Island LNG project, is offering a 15-20 percent stake, sources previously told Reuters. The stake could be worth up to $2 billion, they said.
BG had initially planned to sell an equity stake in the project and to also 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.
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 added.
Still, China’s CNOOC Group, Osaka Gas, Tokyo Gas are showing interest, they added.
‘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.’
Osaka Gas and Tokyo Gas declined to comment.
The other companies, including Qatar Petroleum and Mitsui, either declined to comment or could not be reached for comment immediately.
STEADY RETURN
By tweaking the deal structure, BG is hoping to draw interest from infrastructure funds and sovereign wealth funds that are looking for steady returns, sources said.
Also by de-linking the off-take agreement, BG is taking a view that the current contract gas prices are low and could rise by the time the gas from the project comes on-line in 2014, sources added.
The Queensland Curtis LNG project is built over a 270-hectare site on Australia’s eastern cost. The project involves construction of a 200-kilometer, 42-inch collection pipeline, according to BG’s website.
CIC previously invested in domestic and overseas energy and utility companies as a way to diversify its portfolio. Utilities offer steady returns and are less risky.
CIC has bought stakes in domestic and overseas energy and utility companies such as Sunshine Oilsands and GCL Poly. One of the latest examples is its $3.24 billion investment in a stake in GDF Suez’s E&P unit and in GDF Suez’s natural gas liquefaction plant in Trinidad and Tobago.
The sovereign fund said in January it had bought an 8.68 percent stake in Thames Water from a group of investors led by Australia’s top investment bank Macquarie. CIC did not say how much it had paid, but analysts put the likely value of the deal at between 600 million and 700 million pounds ($900 million – $1.1 billion).
($1 = 0.9703 Australian dollars)
(AGENCIES)
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