Thai PTTEP buys $2.3 billion stake in Statoil oil sands

BANGKOK/CALGARY (Reuters) - Thailand's PTT Exploration and Production PTTE.BK is to buy 40 percent of Statoil's STL.OLSTO.N Canadian oil sands project for $2.3 billion, joining an Asian investor rush into this energy source.

Norway’s Statoil will remain majority owner and operate the Kai Kos Dehseh project in northern Alberta, which it bought in 2007, according to the deal announced on Tuesday.

The investment by PTTEP, the exploration and production unit of state-owned PTT Pcl PTT.BK, is Thailand's first into Canada's oil sands, the largest crude oil source outside the Middle East.

Asian state oil firms have invested billions of dollars in oil sands projects as they seek to fuel their booming economies.

This latest deal will be the largest ever offshore investment by a Thai company, surpassing the $1.9 billion purchase of Australia's Centennial Coal by Banpu BANP.BK this year, according to Thomson Reuters data.

“We view them as a new player with a fresh set of ideas,” Statoil Canada’s president Lars Christian Bacher said in an interview. “Technology development has always been part of Statoil’s DNA and both companies are on the same page when it comes to driving technology development.”

The industry as a whole wants to improve production techniques and cut costs as well as boost the environmental performance of oil sands, which are a heavy, high-carbon energy source that needs extensive processing and refining.

PTTEP, valued at $20 billion and 65 percent-owned by its parent, is among Asia's top 10 explorers and competes with big Chinese oil firms such as CNOOC 0883.HK and Sinopec 0386.HK.

It plans to finance the deal with $800 million of bonds and seeking $500 million in loans this week from four foreign banks, Chief Executive Anon Sirisaengtaksin told reporters.

It will also use $1.5 billion in cash, he added, noting PTTEP’s cash flow of about $3.3 billion a year.

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“The acquisition will obviously be a major boost to PTTEP,” said Adithep Vanabriksha, chief investment officer at Aberdeen Asset Management, which oversees $900 million in Thai assets for its UK-based parent and owns about 8 percent of PTTEP’s stock.

“The key growth opportunity for PTTEP mostly derives from overseas acquisitions,” he added.


Some industry analysts questioned the value of the deal for PTTEP, whose shares were down 2.5 percent to underperform a 1.6 percent loss in Thailand's stock market .SETI.

“It’s quite expensive,” said Supanna Suwankird, analyst at Thanachart Securities in Bangkok, referring to the deal’s enterprise value as a ratio of production.

“The project will have initial production at 10,000 bpd in early 2011. But the company plans to ramp up output to more than 300,000 bpd,” she said.

Analysts in Norway saw the deal as good for Statoil.

“It is very positive that they have made a significant profit,” said Arctic Securities analyst Trond Omdal, who estimated Statoil’s gain at around $900 million.

“This is showing that their investments in unconventional (oil and gas production) are commercial,” said Omdal.

Statoil was up 1.5 percent to 126 crowns at 1037 GMT, while an Oslo benchmark index .OSEBX was down 0.9 percent.

State-controlled Statoil entered Kai Kos Dehseh in 2007 when it bought Canada’s North American Oil Sands Corp for $2 billion. Statoil has since invested a further $1.5 billion.

Having a partner in the project was part of the firm’s strategy from the beginning, Statoil said.

“(It) gives you a bit of a challenge as an operator -- you get a second look on things and you spread your risks,” Peter Mellbye, Statoil’s head of international exploration and production, told Reuters.

Leismer, the first phase of the Kai Kos Dehseh project, is expected produce 10,000 barrels a day of bitumen early next year. The company is awaiting regulatory approval to double that capacity. The second phase -- Corner -- is due to start up in 2015 or 2016, to produce up to 60,000 bpd.

Chinese and South Korean firms have also invested billions of dollars in mining and thermal oil sands projects. The largest was in April, when Sinopec paid $4.65 billion for ConocoPhillips's COP.N stake in a Syncrude Canada venture.

The Statoil deal, subject to Canadian regulatory approvals, is expected to close in the first quarter.

Australia's BHP Billiton's BHP.AX has just canceled its $39 billion hostile bid for Potash Corp POT.TO after the Canadian government blocked the takeover.

Bacher said he did not expect Ottawa to block the deal as it was a partnership not a takeover.

“We are aware of the Canadian process and what it will take to get the approval for having this kind of deal,” he said.

Additional reporting by Ploy Ten Kate in Bangkok, Gwladys Fouche and Joachim Dagenborg in Oslo, Jonathan Spicer in New York and Joseph Chaney in Hong Kong; Editing by Lincoln Feast and Jason Szep