* PetroChina buys into Australia's Browse LNG project
* To pay BHP $1.63 bln for minority stake
* Deal comes as China seeks more foreign energy sources
* Deal hinges on other partners choosing not to match sale
By James Regan
SYDNEY, Dec 12 China's PetroChina Co Ltd
has agreed to pay $1.63 billion for a minority stake
in a controversial Australian liquefied natural gas (LNG)
project, as it steps up efforts to source more of its energy in
Mining and energy giant BHP Billiton said it would
sell PetroChina its share of the Browse LNG project, estimated
to cost $30 billion to build, after deeming it a "non-strategic"
China's state-owned energy giants have been bidding
aggressively for foreign oil and gas fields as Beijing looks to
secure energy supplies to meet rising demand. China also aims to
double the share of gas in its overall energy mix to more than 8
percent by 2015, while coal will be cut to just over 60 percent.
The Browse stake marks Petrochina's first major acquisition
this year after it set aside $16 billion for overseas investment
as part of a plan to have half its production outside of China
within eight years.
"PetroChina is under pressure to grow its overseas output,"
a source familiar with the company's strategy said.
In an emailed statement, PetroChina said the deal would be
"subject to regulatory approval and other ordinary conditions",
but is expected to be completed in the first half of 2013.
The Browse project has been plagued by controversy over its
proposed location at James Price Point on the northwestern coast
of Australia, which has been opposed by some project partners,
environmentalists and Aboriginal landowners.
The investment also comes against a backdrop of soaring
costs for some $170 billion worth of LNG export projects under
construction in Australia, owing to labour shortages,
construction challenges and the strength of the Australian
dollar. Chevron Corp last week revised up the cost of
its Gorgon LNG export complex by $15 billion to $52 billion.
"For (PetroChina), obviously that particular country
probably is not just worrying about the next couple of years.
They've got a long-term requirement for energy," said David
Lennox, a mining resources analyst for Fat Prophets in Sydney.
"You'll find a lot of Chinese companies are stepping into
the operational phases of projects like this to learn the
trade," he added. "Possibly they can take those skills back to
what they are doing in their own offshore region."
The sale hinges on the remaining joint venture partners --
Woodside Petroleum, Royal Dutch Shell Plc, BP
, Japan's Mitsui & Co and Mitsubishi Corp
-- choosing not to exercise rights to match the offer
CHANGING GAS SUPPLY
The Browse deal follows Canada's approval last week of
China's biggest overseas energy acquisition, a $15.1 billion
takeover by state-owned CNOOC of Canadian oil and gas
BHP said it expects the deal to close in the first half of
next year, pending regulatory approvals.
"We believe the sale is a positive given it was a minority
stake in a non core asset," Citi resources analyst Clarke
Wilkins said in a note. "BHP prefers to have operating stakes in
BHP's exit coincides with a major shift in the gas sector,
with a dramatic rise in U.S. production due to the development
of shale deposits causing a global rethink on how markets will
be served in coming years.
With excess gas at home, and prices far below global levels,
companies are scrambling to export U.S. gas to high-paying
markets in Europe and Asia. Fifteen projects are in the early
stages of approval to export, according to government records.
Still, U.S. President Barack Obama may be reluctant to
endorse exports, as it could push up prices for domestic users.
Only one project, Cheniere Energy's Sabine Pass
plant in Louisiana state, has the full regulatory go-ahead and
has signed deals to supply companies in India, Great Britain and
The Browse deal will require approval from Australia's
Foreign Investment Review Board, as PetroChina is state-owned,
but is not expected to run into problems given the firm is
taking a non-controlling stake, said Andrew Lumsden, partner in
corporate advisory at law firm Corrs, Chambers Westgarth.
A KPMG report in August found Chinese firms invested $45.1
billion into Australia in 116 deals between September 2006 and
June this year. Ninety-two of those deals were made by 45
Chinese state-owned enterprises.
Australia has set a course of overtaking Qatar as the
world's top exporter of LNG later this decade, but cost overruns
are threatening the viability of that aim.
BHP's decision to sell out of the Browse project, follows
Chevron's exit in August when it sold its interest to Shell.
The Australian Conservation Foundation is battling
construction of a plant to process gas from the project along
coastline in the Kimberly district, a remote and environmentally
sensitive region in far northwestern Australia.
Environmentalists and landowner groups want the gas piped to
other locations, which they say could include areas around the
existing North West Shelf gas hub further south.
Operator Woodside is scheduled to make a decision on whether
to go forward with the James Price Point location by mid-2013.