IOC signs deal with Petronas for 10% stake in shale gas and LNG project

State-run Indian Oil Corporation (IOC) today signed a deal to buy 10% stake in Malaysian firm Petronas' shale-gas and liquefied natural gas (LNG) project in British Columbia for $900 million. 

The deal was signed through IOC's wholly-owned subsidiary IndOil Montney Ltd with Progress Energy Canada and Petronas Carigali Canada BV (PCC BV), a wholly owned affiliates of Petronas, the company said in a statement today.

As part of the transaction, Indian Oil Corporation Ltd shall also offtake 1.2 million tons of liquefied natural gas (LNG) per annum (MMTPA), which represents 10% of the LNG facility's production, for a minimum period of 20 years. JAPEX Montney Ltd (with 10%) and PetroleumBRUNEI (with 3%) are the other partners who acquired their interest in the project in 2013. Petronas will hold the remaining 77% of the integrated project.

The project holds reserves of 8.35 trillion cubic feet equivalent of natural gas and best case contingent resources of 24.7 tcf, it added. The total reserves and resource potential is in excess of 50 Tcf in which, IOC share will be over 5 tcf. Progress Energy Canada is currently producing approximately 400 million cubic feet equivalent of natural gas per day in North East British Colombia, which is currently being supplied to the Canadian market.

The first LNG export from the project is likely to happen by late 2018 and the final investment decision will be taken by the end of 2014. Last year, it sold a 10% stake in the integrated shale gas development and LNG project to Japan Petroleum Exploration Co (Japex) and another 3% to Petroleum Brunei. The Canadian asset will produce as much as 19.68 million tonnes of LNG a year for 25 years starting in 2018. IOC has already lined up a one-year bridge loan from a group of banks to fund the deal.