Malaysia’s Petronas has pitched an estimated $1 billion stake in a prized upstream local gas project to potential bidders including Royal Dutch Shell, ExxonMobil Corp., Thailand’s PTT Exploration and Production and Japanese firms, sources familiar with the matter said.
If successful, the deal could mark Petronas’ biggest upstream stake sale since oil prices started declining more than two years ago. Petronas is targeting lowering operating expenses, job cuts and project rollbacks to help it navigate through the low oil price environment.
Citing sources, Reuters reported in February that Petronas was considering selling a stake of as much as 49% in the SK316 offshore gas block in Malaysia’s Sarawak state.
The state-owned oil and gas company has approached about a dozen prospective buyers including global oil majors and Asian firms focused on Southeast Asia, said the sources, who declined to be identified as the talks are private.
They said Petronas has begun providing financial and operational data to the companies and expects to receive bids over the next few weeks.
“It’s just what the environment is. Nobody wants to keep all the risk on their books,” said Vikas Halan, senior credit officer, corporate finance group at Moody’s, adding he viewed the move as a rebalancing of Petronas’ portfolio.
“Petronas is the leader in the oil and gas space, especially on the gas side. The experience of getting or producing LNG and marketing LNG is quite an interesting one and Petronas becomes a logical choice for players,” he said.
In a statement to Reuters, Petronas said that through its subsidiary, Petronas Carigali Sdn Bhd, it is looking for partners who can bring the technology and capabilities to explore, develop and efficiently operate the various fields and opportunities in the SK316 offshore gas block.
“We are confident that we will attract the right partners to maximize the potential value of these opportunities to help meet the world's growing oil and gas demand,” Petronas said.
It was not immediately known what the individual companies’ response to Petronas’ approach was.
One financial source said a minority stake might not appeal to non-Asian oil majors but a decision to bid would depend on details of the stake being offered, valuations and the potential for long term partnerships with Petronas.
ExxonMobil declined to comment, while Shell referred the query to Petronas. A spokeswoman for PTTEP declined to comment on the deal but said the company was keen to invest in Southeast Asia because it had expertise in the region where costs and risks were low.
Gas from the NC3 field in the SK316 Block feeds Malaysia’s LNG export project, known as LNG 9, Petronas’ joint venture with JX Nippon Oil & Energy Corp that began commercial production in January.
Petronas could use the funds from the stake sale to develop the Kasawari Field in the same block. The field is one of the largest non-associated gas fields in Malaysia and has an estimated recoverable hydrocarbon resource of about 3 trillion standard cubic feet.
“Kasawari will require a significant capital investment to develop due to the high CO2 content,” said Prasanth Kakaraparthi, senior upstream research analyst at consultancy Wood Mackenzie.
“In a lower-for-longer oil price world, it makes commercial sense for Petronas to farm down its interest and partner with companies that have innovative CO2 handling technology,” he said.
Petronas put on hold plans to develop the field in 2015 after oil and gas prices fell, according to media reports.
Recommended Reading
NAPE: Turning Orphan Wells From a Hot Mess Into a Hot Opportunity
2024-02-09 - Certain orphaned wells across the U.S. could be plugged to earn carbon credits.
Chevron Hunts Upside for Oil Recovery, D&C Savings with Permian Pilots
2024-02-06 - New techniques and technologies being piloted by Chevron in the Permian Basin are improving drilling and completed cycle times. Executives at the California-based major hope to eventually improve overall resource recovery from its shale portfolio.
Comstock Continues Wildcatting, Drops Two Legacy Haynesville Rigs
2024-02-15 - The operator is dropping two of five rigs in its legacy East Texas and northwestern Louisiana play and continuing two north of Houston.
CEO: Continental Adds Midland Basin Acreage, Explores Woodford, Barnett
2024-04-11 - Continental Resources is adding leases in Midland and Ector counties, Texas, as the private E&P hunts for drilling locations to explore. Continental is also testing deeper Barnett and Woodford intervals across its Permian footprint, CEO Doug Lawler said in an exclusive interview.
CNX, Appalachia Peers Defer Completions as NatGas Prices Languish
2024-04-25 - Henry Hub blues: CNX Resources and other Appalachia producers are slashing production and deferring well completions as natural gas spot prices hover near record lows.