Australia, June 11th, 2010 - Santos Ltd. may raise as much as A$1 billion ($850 million) selling a stake in its liquefied natural gas project in Australia, and China Petroleum & Chemical Corp. is a potential buyer, CLSA Asia-Pacific Markets said.
Santos, which is planning the Gladstone LNG venture in Queensland state with Petroliam Nasional Bhd., may sell as much as 19.9 percent of the development once uncertainty surrounding Australia’s proposed resource tax is resolved, Di Brookman, an analyst at CLSA in Sydney, said by telephone today.
Sinopec, as China Petroleum is known, is keen to invest in the Australian coal-seam gas industry after PetroChina Co. and Royal Dutch Shell Plc agreed in March to acquire Australia’s Arrow Energy Ltd. and China National Offshore Oil Corp. signed an accord to buy LNG from BG Group Plc’s Queensland venture.
“The Chinese are well known to be desirous of energy sources outside of China, and there’s no reason why Sinopec wouldn’t be interested,” said Adrian Loh, who covers Santos as associate director at DnB NOR ASA in Singapore.
Sinopec said last month it was in gas-supply discussions with Santos and Qatar. Santos is in talks with Sinopec, Asia’s biggest oil refiner, about the potential sale of a A$400 million project stake, the Australian newspaper said today. A Santos team was seen June 7 in a Brisbane hotel talking with Sinopec officials and advisers, according to the report.
Deal ‘Very Close’
Australia’s third-largest oil and gas producer said last month it was “very close” to announcing an additional customer for its coal-seam gas-to-LNG venture. The plan to impose a new tax on resource project profits had created uncertainty and delayed a development decision, the Adelaide-based producer said.
Santos is in “negotiations with a number of parties,” spokesman Matthew Doman said today, declining to comment further. Huang Wensheng, a spokesman for Beijing-based Sinopec, didn’t immediately answer calls to his mobile phone.
Santos rose 3.1 percent to A$13.50 in Sydney trading, while the benchmark S&P/ASX 200 Index gained 1.6 percent.
The gas producer may receive between A$750 million and A$1 billion for almost 20 percent of the LNG venture, assuming it gains clarity on the tax measure, Brookman said. Santos has said it now aims to make an investment decision on the venture later this year, as opposed to a prior mid-year target.
The government may change the plan for a 40 percent tax on resource “super profits” to bring the measure in line with an existing levy on offshore oil and gas ventures and remove the uncertainty hurting Queensland coal-seam gas projects proposed by Santos, Origin Energy Ltd. and BG Group, she said.
Santos ‘Needs Cash’
Signing up an Asian buyer would help Santos fund two LNG processing units at Gladstone, Brookman said. “They need some cash to develop this second train,” she said.
The Australian company is prepared to sell more than 9 percent of the venture as part of a fuel-supply agreement, Chief Executive Officer David Knox said in Brisbane last month.
Santos currently owns 60 percent of the proposed development, while Malaysia’s Petroliam Nasional, or Petronas, has the rest. Santos has agreed to sell 2 million tons of LNG a year to Petronas.
Before the tax measure was announced on May 2, Santos may have been as close as 24 hours away from signing up a buyer of gas from the Queensland development, Brookman said in a report. - Bloomberg
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