The Sydney Morning Herald
January 21, 2014
Kuwait Foreign Petroleum Exploration Co has struck a deal to buy Royal Dutch Shell out of Chevron’s Wheatstone liquefied natural gas project in Western Australia for $US1.135 billion ($1.3 billion) in what could be the first of a string of asset divestments by the oil major in the country.
The acquisition almost doubles Kufpec’s stake in the $29 billion LNG project under construction on the WA mainland to 13.4 per cent from 7 per cent. It includes Shell’s 8 per cent stake in Shell’s upstream gas supply joint venture with Chevron at the Wheatstone and Iago gas fields in the Carnarvon Basin.
Shell is thought to be targeting some $US15 billion of asset sales in the next two years as it ramps up efforts under new global chief executive Ben van Beurden to divest non-core and underperforming assets.
The oil heavyweight is also tightening up capital spending criteria and seeking to boost returns.
Assets up for sale in Australia also include Shell’s refining business, centred around its refinery in Geelong, and its remaining 23.2 per cent stake in Woodside Petroleum, worth about $7.4 billion.
The major’s stake in Wheatstone is seen as a non-core asset, constituting an interest of under 10 per cent when Shell typically holds more meaningful stakes in LNG projects.
It owns a majority of the Prelude floating LNG venture under development in the Browse Basin and 25 per cent of Chevron’s $US54 billion Gorgon LNG venture, as well as one-sixth of the North West Shelf LNG venture.
While Shell has made it plain it is concerned about rising costs in Australian LNG, which have delayed its proposed $US20 billion-plus Arrow venture with PetroChina in Queensland, the latest deal is seen as driven more by streamlining its interests in Australia, rather than by any worries about costs at Wheatstone.
“Shell will remain a major player in Australia’s energy industry,” Mr van Beurden said in a statement.
“However, we are refocusing our investment to where we can add the most value with Shell’s capital and technology. We are making hard choices in our worldwide portfolio to improve Shell’s capital efficiency.”
Kufpec bought into Wheatstone alongside Apache in 2009, when the pair struck a deal to sell gas from their Julimar and Brunello fields through the Wheatstone gas processing infrastructure, which is being built near Onslow. The rest of the gas for the first two LNG trains will come from the Wheatstone and Iago deposits.
The Kuwaiti state-owned company said the deal expands Kufpec’s assets in the “attractive” oil and gas sector in Australia. Chief executive officer Sheikh Nawaf Al-Sabah said that production and cash flows from the acquisition “will provide stable revenue to Kufpec for a quarter century”.
It adds 139 million barrels of oil equivalent to Kufpec’s resource base, with average production for the company set to reach 18,350 boe a day by 2018. First production from the 8.9 million tonnes a year Wheatstone project is due to commence in late 2016.
The deal is still subject to approval from the Foreign Investment Review Board and from the partners in the Wheatstone and Wheatstone-Iago ventures.
Meanwhile, Shell separately announced that Andy Brown, director of its international upstream business, has taken extended leave to recover from a recent medical procedure.
Maarten Wetselaar, executive vice-president of integrated gas and the former head of finance for the international upstream business, will temporarily assume Mr Brown’s responsibilities in his absence, in addition to his own.