Shell, PetroChina win Arrow for $3.2 bn

Royal Dutch Shell Plc and PetroChina Co agreed to buy Arrow Energy Ltd after increasing their offer to A$3.5 billion ($3.2 billion), marking China’s entry to Australia’s coal-seam gas industry.

Shell and PetroChina will pay A$4.70 cash a share for Arrow’s Australian business, the Brisbane-based company said today. The price was raised from A$4.45 and is 35 per cent above the stock’s level before the initial bid was reported March 8. Investors will also get shares in a new company holding Arrow’s gas assets in China, Indonesia, India and Vietnam, which may be worth as much as A$400 million, according to analysts.

Shell and PetroChina would gain control of Australia’s largest holder of permits to extract gas from coal seams for processing into liquid form for export. They are paying less for reserves than BG Plc did in 2008, said John Young, an analyst at Wilson HTM Investment Group. Chinese companies spent a record $32 billion last year on oil fields and coal and metal mines to obtain resources for the fastest-growing major economy.

“Arrow’s assets in Australia are located in close geographical proximity to Asia and the reserves are of a very significant scale,” Young said by telephone from Melbourne. “They are world-scale, it’s material to companies as large as Shell and PetroChina.”

Arrow fell 2.6 per cent to close at A$5.10 in Sydney, reflecting disappointment among some investors who had expected a bigger increase in the bid. The stock had climbed 52 per cent, reaching a record close of A$5.29 on March 18, as investors bet the initial offer would be sweetened.