Exclusive: PetroChina may sell Australian and Canadian assets to stop losses

A PetroChina logo is seen at a gas station in Beijing, China, March 21, 2016. Photo taken March 21, 2016. REUTERS/Kim Kyung-Hun

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SINGAPORE (Reuters) – PetroChina may sell natural gas projects in Australia and oil sands in Canada to reduce losses and move money to more profitable locations in the Middle East, Africa and Central Asia, two people familiar with the matter. He said.

PetroChina’s plan comes on the heels of a similar strategic shift by smaller country CNOOC Ltd (0883.HK), which was preparing to exit operations in Britain, Canada and the United States over concerns that the assets could be subject to Western sanctions. Read more

The two sources said the sales follow an internal review of PetroChina’s global portfolio that began last year, but declined to be named because the discussions were not public.

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In contrast to CNOOC’s sales, PetroChina’s divestiture is driven more by the disappointing economy of assets than by any fears of US sanctions because it does not own any oil and gas assets in the United States, although political tensions with Australia and Canada have also played a role. .

The sources said that the major state oil and gas company hopes to sell some of these assets, which have incurred billions of dollars in losses and are located in areas where the company cannot easily compete in the next two years.

“Australian gas assets – both Arrow Energy and Browse – are among the highest ‘passive assets’ in PetroChina’s global portfolio. It is also an area where the CNPC has little competitive advantage,” said one of the sources.

PetroChina bought Arrow Energy in 2010 for $2.5 billion via a joint venture with Shell (SHEL.L), its first investment in the Australian coal gas sector. It bought BHP’s stake in Browse, Australia’s largest untapped gas resource, in 2013 for $1.63 billion.

The company is also looking to offload its wholly owned MacKay River Oilsands and Dover Oilsands projects in Canada due to losses in production and processing of the tar-like fuel into bitumen, the sources added.

PetroChina declined to comment.

China’s state energy companies were among the industry’s most aggressive energy acquisitions in early 2010, including CNOOC’s $15 billion acquisition of Canada’s Nexen in 2013. But they have become quieter after the 2014/15 oil price crash and with scrutiny the government’s financial situation.

Economic factors may also have caused PetroChina to question its buying spree.

Arrow is the largest foreign investment ever to lose to PetroChina. Browsing is technically challenging and production is unlikely to start until 2030, even if it gets final approval.

Arrow has only made a final investment decision to develop the 5 trillion cubic feet Surat gas project in Queensland in 2020. It has been delayed due to a dispute between PetroChina and Shell over gas pricing for an export facility operated by Shell, according to Reuters. It has been reported.

Between 2018-2021, Arrow reported losses estimated at A$3.3 billion ($2.29 billion), including A$2.2 billion in losses.

“Investment decisions by our shareholders are theirs and Arrow will not comment or speculate,” a spokesman for Arrow said when contacted by Reuters.

browse

As for browsing, partners including BP (BP.L), Shell and Japan Australia LNG have spent more than $100 million on development studies since PetroChina bought the project, including a plan canceled in 2016 to create $30 floating liquefied natural gas. Billion Dollars (LNG) Project.

They are now looking into a $22 billion plan to use the field to fuel the Karatha Gas Plant (KGP) in northwest Australia as the plant’s original fields are drying up.

Browsing operator Woodside said the project would only go forward if the partners could come up with an economically viable carbon capture and storage solution and reach a fee agreement with KGP owners.

One of the sources said that this lower cost plan does not appeal to PetroChina.

“PetroChina expects a great deal of uncertainty in the future, as it is the smallest stakeholder and has little leverage along the value chain as it has no ownership in the downstream KGP plant,” the source said.

oil sands

PetroChina paid C$1.9 billion ($1.48 billion) in 2009 for a 60% stake in the Dover and Mackay River projects from Athabasca Oil Corp, then purchased the remaining stakes in the projects for a similar amount during 2012 and 2013.

The first phase of the Mackay project began in 2017 with 35,000 bpd of bitumen, peaking at 150,000 bpd, while the Dover site is expected to eventually produce 250,000 bpd of bitumen, according to PetroChina Canada. .

One of the sources familiar with the divestment potential said PetroChina is not satisfied with the relatively high production costs of $70 per barrel on the two projects, and both sites are facing local resentment over their environmental impact.

($1 = 1.4440 Australian dollars)

(1 dollar = 1.2838 Canadian dollars)

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Chen Aizhou report. Additional reporting by Sonali Paul in Melbourne and David Gavin in New York. Editing by Christian Schmolinger

Our Standards: Thomson Reuters Trust Principles.

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