* Shell to pay $4.4 billion in cash, assume $2.3 bln in
leases and debt
* Repsol to cut debt by more than half to 2.2 billion euros
* Extends Shell's leading LNG position among oil majors
* Deal excludes Canadian terminal Canaport
By Tracy Rucinski and Andrew Callus
MADRID/LONDON, Feb 26 Repsol has sold a
set of liquefied natural gas (LNG) assets to Royal Dutch/Shell
for $4.4 billion cash, more than halving the Spanish
oil company's heavy debt and extending the Anglo-Dutch group's
dominant position in LNG.
The sale, announced by the two companies on Tuesday,
includes LNG assets in Trinidad and Tobago, Peru and the Bay of
Biscay but not Canadian import terminal Canaport, which failed
to attract interest because booming North American gas
production has eroded its value.
Shell will also take on $2.3 billion of financial leases and
debt as part of the deal Which they expect to complete before
the end of the year.
Repsol said it would book a capital gain of $2.7 billion
from the deal and make a $1.3 billion provision against the
value of Canaport, leaving a net gain of $1.4 billion and easing
its financial situation.
The Spanish company has been under pressure to reduce debt
and hold onto an investment-grade credit rating since the
Argentine government seized control of its majority stake in
energy company YPF last April.
It put the LNG assets up for sale last summer as part of a
wider divestment programme aimed at cutting debt, which stood at
5 billion euros ($6.5 billion) at the end of September,
excluding debt related to its 30 percent stake in Gas Natural
Following the sale, net debt will fall to 2.2 billion euros,
The LNG sale had drawn interest from a range of bidders
including China's Sinopec, Russia's Gazprom, GAIL Ltd
of India and GDF Suez of France.
SHELL LNG LEADER
Shell is already the top LNG producer among the world's
biggest oil companies.
It has 22 million tonnes per year (mtpa) of LNG on stream -
more than a tenth of global demand - and is building 7 mtpa of
new LNG capacity in Australia that will increase its production
by 30 percent over the next few years.
This deal adds a further 4 mtpa of owned capacity, taking
its production to about 33 mtpa by 2017. Its closest rival among
the oil majors is Exxon Mobil, which is expected to have
about 20 mtpa of production in 2017.
The deal also widens its geographic reach in LNG into the
West Atlantic from Atlantic LNG in Trinidad & Tobago where it
will become a partner with BG Group, and into the East
Pacific from Peru LNG.
These additions will complement Shell's existing LNG
capacity in Africa, Asia, Australia, the Middle East and Russia,
the company said.
Under the deal, Shell has committed to continue supplying
Canaport with just 0.1 million tonnes a year of LNG over a
period of 10 years, enough to keep the terminal ticking over,
but little more.
Repsol, which is due to report 2012 results on Feb. 28, has
sold assets for more than 5 billion euros in the past year,
surpassing the target outlined in its strategic plan.
Fitch revised Repsol's credit rating outlook to stable from
negative in late January on expectations that it would complete
its asset sales plan. S&P and Moody's are expected to make a
statement in the coming days on their outlook.
S&P rates Repsol's long-term debt at BBB- with a stable
outlook, while Moody's has a Baa3 rating with a negative