IOC to buy 10% stake in Petronas’ LNG project

Tags: News
State-run Indian Oil Corporation is buying 10 per cent stake in Canada’s Progressive Energy Resources held by Malaysian petroleum major Petronas for $900 million.

This will be IndianOil’s first big investment in shale gas and liquefied natural gas assets in North America.

An oil ministry official, who did not wish to be named, confirmed that the board of directors of IndianOil had approved the proposed deal with Petronas. IndianOil chairman R S Bhutola was not available for a comment, when contacted by this newspaper.

But newswire Reuters said an unnamed IOC official had acknowledged that his firm would soon sign a deal and was in the process of raising fund for the acquisition. “Now it is a matter of days,” the IOC source told Reuters.

Reuters also quoted unnamed Indian government sources while reporting from Singapore that earlier this month the Indian cabinet had approved IOC's bid to buy a 10 per cent stake in Progress Energy Resources for $900 million. Other sources told Reuters that IOC had already secured a $900 million one-year bridge loan from a group of banks earlier this month to back the Canadian purchase.

Reuters quoted the Petronas’ president and chief executive Shamsul Azhar Abbas thus: “I am pleased to announce that we have just finalised a further 25 per cent equity participation from an Indian party and an established Asian LNG buyer.”

Earlier, Reliance Industries (RIL) led by Mukesh Ambani and state-owned Gas Authority of India (GAIL) bought shale gas and LNG assets abroad.

RIL has invested over $1.36 billion in shale gas assets of Pioneer Natural Resources of the US in 2010. GAIL has invested $95 million in Houston-based Carrizo Oil & Gas in 2011.

Petronas, through its global arm Petronas International Corporation, had invested $5.2 billion in Canada’s Progress Energy Resources Corporation to take effective control of the Altares, Lily and Kahta shale gas assets in northeastern British Columbia.

In March 2013, Petronas sold 10 per cent stake in the project to Japan Petroleum Exploration (Japex) and another 3 per cent to Petroleum Brunei.

Once the latest deal with IndianOil and the Chinese state-owned oil company goes through, Petronas will be left with 12 per cent stake in the project. Petronas is reportedly in the process of divesting even this 12 per cent stake to international partners that it is not willing to identify right now.

Progressive Energy has more than 1.9 trillion cubic feet of proven and probable gas reserves in British Columbia. IndianOil’s move to pick up 10 per cent in this asset is part of its overseas drive to secure profit petroleum and the Indian government’s campaign to achieve energy security.

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