Exclusive: PetroChina could sell Australian and Canadian assets to stem losses

The logo of PetroChina is seen at a gas station in Beijing, China March 21, 2016. Picture taken March 21, 2016. REUTERS/Kim Kyung-Hoon

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SINGAPORE, June 28 (Reuters) – PetroChina may sell natural gas projects in Australia and oil sands in Canada to stem losses and divert funds to more lucrative locations in the Middle East, Africa and Central Asia, two people familiar with the subject said.

PetroChina’s plan follows a similar strategic shift by its smaller state counterpart, CNOOC Ltd (0883.HK), which was preparing to exit its operations in Britain, Canada and the United States due to fears that the assets could be subject to Western sanctions. Read more

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

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Unlike CNOOC’s sales, PetroChina’s disposals are driven more by disappointing asset economics than fear of US sanctions, as it has no oil and gas assets in the United States, although political tensions with the Australia and Canada also played a role, they said. .

The national oil and gas major hopes to sell some of those assets, which have suffered billions of dollars in losses and are in areas where the company cannot easily compete, over the next two years, the sources said. .

“The Australian gas assets – both Arrow Energy and Browse – are considered among the most significant ‘negative assets’ in PetroChina’s global portfolio. This is also an area where CNPC has little competitive advantage,” the company said. one of the sources.

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

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

PetroChina declined to comment.

China’s state-owned energy companies were among the industry’s biggest acquirers in the early 2010s, including CNOOC’s $15 billion takeover of Canada’s Nexen in 2013. collapse in oil prices in 2014/15 and as the government scrutinized their finances.

Economic factors also likely caused PetroChina to question its buying spree.

Arrow is PetroChina’s most loss-making foreign investment. Browse is a technological challenge and is unlikely to start production until 2030, if it even receives final approval.

Arrow did not make a final investment decision to develop the 5 trillion cubic foot Surat gas project in Queensland until 2020. It was held back by a dispute between PetroChina and Shell over gas pricing to a facility export facility operated by Shell, Reuters reported.

Between 2018 and 2021, Arrow recorded approximately A$3.3 billion ($2.29 billion) in losses, including A$2.2 billion in impairments.

“Our shareholders’ investment decisions are a matter to them and Arrow will not comment or speculate,” an Arrow spokesman said when contacted by Reuters.

BROWSE

For Browse, partners such as BP (BP.L), Shell and Japan Australia LNG have spent more than $100 million on development studies since PetroChina bought the project, including an abandoned plan in 2016 to set up a $30 billion floating liquefied natural gas (LNG). ) project.

They are now eyeing a $22 billion plan to use the field to supply the Karratha Gas Plant (KGP) in northwest Australia as that plant’s original fields dry up.

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

But this lower-cost plan doesn’t sit well with PetroChina, one of the sources said.

“PetroChina foresees great uncertainties ahead, being the smallest stakeholder and having little influence 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 Athabasca Oil Corp’s Dover and MacKay River projects, then bought the remaining stakes in the projects for a similar amount in 2012 and 2013.

The first phase of the MacKay project started in 2017 with 35,000 barrels per day (bpd) of bitumen, peaking at 150,000 bpd, while the Dover site is expected to eventually produce 250,000 bpd of bitumen, according to the website. of PetroChina Canada. .

One of the sources close to the possible divestiture said PetroChina was unhappy with the relatively high production costs of $70 a barrel on the projects and that both sites are facing dissatisfaction from local residents over their environmental impact.

($1 = 1.4440 Australian dollars)

($1 = 1.2838 Canadian dollars)

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Reporting by Chen Aizhu; additional reporting by Sonali Paul in Melbourne and David Gaffen in New York; Editing by Christian Schmollinger

Our standards: The Thomson Reuters Trust Principles.

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