GDF Suez explored partial sale of Bonaparte LNG stake
BY DAVID WINNING
SYDNEY -- GDF Suez explored the sale of part of its stake in a multibillion dollar Australian gas export facility targeting rising Asian demand for clean-burning fuels, two people familiar with the matter said.
The company engaged Bank of America Merrill Lynch in recent months to advice on reducing its 60% interest in the proposed Bonaparte LNG, joint venture (JV) with Santos, the people said.
GDF Suez is looking to sell assets worth as much as $14.4 billion by the end of 2014 to boost its balance sheet at a time when weak euro-zone growth is hurting energy demand and French regulators are restricting its ability to raise natural gas prices.
Initial talks with interested parties didn't result in a deal, and GDF Suez isn't in active negotiations for a stake sale at present, the people said. Still, the high cost of developing Bonaparte LNG may prompt GDF Suez to look again at introducing another partner, particularly from Asia, they added. Spokespersons for GDF Suez and Santos declined to comment.
Australia is poised to overtake Qatar as the world's top exporter of LNG by the end of the decade, thanks to an investment boom led by companies like Chevron, ExxonMobil and Shell. The country's close proximity to Asian markets, its stable regulatory system and vast untapped reserves of natural gas appeal to energy companies that are finding it hard to access projects in countries like Russia, Saudi Arabia and Venezuela.
Selling a stake would ease funding pressures on GDF Suez by cutting its share of development costs. Selling part of Bonaparte LNG would also spread risk for development of a project that represents GDF Suez's first direct foray into technically complex LNG production, where natural gas is super-cooled and loaded onto tankers for export.
Budget overruns at several other LNG developments in Australia have underscored the risks for international companies weighing new projects. Woodside Petroleum recently shelved plans to build an onshore terminal to process natural gas from its Browse resource in Western Australia state because it wasn't commercially viable.
Bonaparte LNG is set to be particularly challenging, given it will deploy untried FLNG, where processing of the gas extracted from offshore fields is carried out on a vessel at sea, rather than onshore. GDF Suez has been studying the technology for six years, with the project due to use a vessel extending 400 m.
GDF Suez in 2010 paid Santos up to $370 million to enter the Bonaparte LNG project. The deal included an upfront cash payment of $200 million for 60% of the Petrel, Tern and Frigate gas fields in the Bonaparte Basin, located around 170 km from shore.
The company agreed to pay Santos an additional $170 million when a final investment decision was made on the proposed FLNG facility, which would process natural gas from the three fields. Santos has said the joint venture wants to start construction in 2014, in time to export its first cargoes by 2018.
GDF Suez and Santos's project is slated to produce between 2 MMmt and 3 MMmt of LNG each year.
FLNG is often touted as a means of mitigating cost pressures because much of the construction process occurs offshore in countries with cheaper sources of labor. Companies also don't have to pay for acquiring and clearing land. However, with seven LNG projects currently under construction, new ones risk running into persistent cost headwinds driven by a strong local currency and shortage of skilled labor.
Asian LNG buyers typically attempt to tighten the security of their supplies by buying stakes in LNG projects, and could emerge as possible stake buyers should GDF Suez move toward a deal.
Dow Jones Newswires