Petronas to Cut Canada LNG Stake to 50%, in Talks with Sinopec
OREANDA-NEWS. August 07, 2013. Petronas plans to sell down its stake in a USD20 billion Canadian liquefied natural gas (LNG) export project to as low as 50 percent, in order to share the cost of bringing cheap energy to Asia, three people familiar with the matter said.
The Malaysian state oil firm is in discussions with China Petroleum & Chemical Corp (Sinopec) to take up at least a 10 percent stake, the sources told Reuters.
Petronas has made a big push into the Canadian energy sector, acquiring Progress Energy for CAD5.2 billion (USD 4.9 billion) last year in a deal that gave Malaysia's only Fortune 500 firm access to shale properties in northeastern British Columbia.
But now Petronas needs to fork out USD 20 billion to build two LNG trains and a pipeline to channel the supplies to Canada's West Coast, spurring it to bring partners into the project to share the financial burden.
"The directive is to go aggressive on sharing out the risk for such a project. It's win-win as Petronas raises the cash and the partners get preferential access to Canada LNG supplies," one source familiar with Petronas' commercial strategy told Reuters.
For the new partners, the investment would ensure long-term gas supplies.
Petronas has committed to spend 300 billion ringgit (USD 94.06 billion) from 2011 to 2015 on its global development projects.
Petronas officials were not immediately available for comment. A Sinopec spokesman said he was not aware of such talks.
The sources declined to be identified as they were not authorised to speak to the media.
Petronas is in advanced discussions with Indian Oil Corp Ltd to sell a 10 percent stake valued at about USD 1 billion, Reuters reported earlier this month.
Earlier in March, it signed the first deal with Japan Petroleum Exploration Co Ltd (Japex) for a 10 percent stake. While Japex did not reveal the price of the acquisition, sources familiar with the deal put it at close to USD 1 billion.
Assuming Petronas concludes every additional 10 percent stake sale at about USD 1 billion, it would raise close to USD 5 billion by cutting down its stake to 50 percent.
The move by Petronas comes as some other Asian state oil companies turn cautious about their outbound investments.
South Korea is reviewing the overseas investments it has made in the oil and gas sector over the past five years due to poor profitability, a process which could lead to asset sales.
South Korea's three state firms invested a total of USD 23.21 billion from 2008 to 2012, said the assembly statement, causing debt-to-equity ratios to jump in 2012 against 2007.
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