IOC to buy 10% in Petronas' LNG project for $900 mn

Acquisition in British Columbia to mark Indian firm's entry into North America

In a move that will mark Indian Oil Corporation’s (IOC’s) entry into North America, the state-run company is set to acquire a 10 per cent stake in Malaysian firm Petronas’ shale-gas and liquefied natural gas (LNG) project in British Columbia for Canadian $1 billion ($900 million). The Cabinet had cleared the proposal for this on February 12. The oil major has already secured a one-year bridge loan to fund the deal.

“I am pleased to announce we have just finalised a further 25 per cent equity participation from an Indian party and an established Asian LNG buyer,” Petronas President & CEO Shamsul Azhar Abbas said at the LNG Supplies for Asian Markets conference in Singapore, according to the media reports.

Though he did not disclose the identity of buyers, sources said IOC was buying 10 per cent (with an offtake agreement), while the remaining 15 per cent might go to a Chinese firm.

Asked about this, an IOC spokesperson refused to comment. Asenior petroleum ministry official confirmed the Cabinet had cleared the proposal on February 12 and IOC had secured a bridge loan.

Petronas, through its wholly-owned subsidiary Petronas International Corp, had bought Canada’s Progress Energy Resources Corporation in a Canadian $5.2-billion deal to get the Altares, Lily and Kahta shale gas assets in Northeastern British Columbia in 2011.

In March 2013, Petronas had sold a 10 per cent stake in this project for an undisclosed amount to Japan Petroleum Exploration. Later, of the 50 per cent stake Petronas was looking to offload, it sold a minority stake to Petroleum Brunei. The company is also looking to offload another 12 per cent in the project. According to a Reuters report, development of the shale gas resources and an LNG facility of 12 million tonnes a year have been pegged at $35 billion.

“We are in advanced talks with other buyers for the remaining 12 per cent,” Abbas said. IOC’s overseas portfolio includes nine oil blocks in Libya, Gabon, Nigeria, Timor-Leste, Yemen and Venezuela.

IOC and its subsidiary (Chennai Petroleum Corporation Ltd) account for  49 per cent market share in the petroleum products segment, 31 per cent national refining capacity and 71 per cent downstream sector pipelines capacity in the country. The IndianOil group of companies owns and operates 10 of India’s 22 refineries, with a combined refining capacity of 65.7 million tonnes a year. IndianOil’s cross-country network of crude oil and product pipelines spans 11,214 km and has a capacity of 77.258 mtpa of crude oil and petroleum products and 10 million standard cubic metres a day of gas. The company’s shares gained 1.4 per cent on NSE on Tuesday, to close at Rs 247.45 a piece.