Shell acquires stake in Australian LNG

April 11, 2011 at 12:15 PM
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PERTH, Australia, April 11 (UPI) -- Oil giant Shell will acquire a 6.4 percent share of Chevron's Wheatstone liquefied natural gas project off the coast of northwest Australia.

The deal, announced Sunday, calls for a combined capacity of 8.9 million tons per year of LNG, as well as a domestic gas plant under the first phase.

"The Wheatstone Project is set to become one of Australia's largest resource projects and Australia's first LNG hub," said Chevron Australia managing director, Roy Krzywosinski, in a statement.

While financial terms of the deal were not disclosed, The Australian newspaper said it is likely to be around $2 billion.

Craig McMahon, an analyst with Wood Mackenzie in Perth, told the Financial Times that Shell had built a sizeable gas portfolio in Australia and this latest alliance with Chevron builds on the pair's exploration and development partnership.

"Shell believes it can have more of a long-term influence on Wheatstone's evolution by having an equity stake," he said. "By taking this stake they are absolutely part of this large project and it underlines their confidence in Wheatstone's future."

Chevron discovered Wheatstone in August 2004 and in March 2008 announced its intention to develop it as a greenfield onshore LNG and domestic gas project.

Even prior to Japan's nuclear disaster, McMahon said, there had been growing demand for LNG in Asia.

Australian Energy and Resources Minister Martin Ferguson, speaking to the Australian Petroleum Production & Exploration Association's annual conference Monday, said "we are entering the LNG age,"' noting that Japan's earthquake and tsunami was likely to lead to increased demand for LNG and that Australia was well-placed to meet the higher demand.

Meanwhile, Chevron said negotiations are continuing with its Wheatstone customers Tokyo Electric Power Company, Korea Gas Corporation and Kyushu electric, also posed to take equity stakes in the project, Platts reports. TEPCO, operator of Japan's stricken Fukushima nuclear power plant, has contracted for 4.1 million tons a year of LNG from Wheatstone, Korea Gas for 1.5 million tons and Kyushu for 700,000 million tons.

So far, local subsidiaries of Apache Corp. and Kuwait Foreign Petroleum Exploration Company have signed deals to become equity participants in Wheatstone, at 13 percent and 7 percent respectively.

The deal represents Shell's first major investment in Australia, after selling 10 percent of its stake in Woodside Petroleum last year, which netted more than $3 billion, The Australian reports.

Shell aims to increase its LNG capacity by more than 20 percent by 2015.

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