Image: Reuters Berita 24 English - Two people who know about the situation say that PetroChina may sell out of natural gas projects in Aus...
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| Image: Reuters |
Berita 24 English - Two people who know about the situation say that PetroChina may sell out of natural gas projects in Australia and oil sands in Canada to stop losing money and move funds to more profitable sites in the Middle East, Africa, and central Asia.
The plan of PetroChina is similar to a strategic change made by a smaller state rival, CNOOC Ltd. CNOOC Ltd. was getting ready to leave Britain, Canada, and the United States because it was worried that Western sanctions could be put on its assets there.
The sales are the result of an internal review of PetroChina's global portfolio that started last year, said the two sources, who did not want to be named because the talks are private.
They said that, unlike CNOOC's sales, PetroChina's sales are more about the disappointing economics of the assets than any fear of U.S. sanctions, since PetroChina doesn't own any oil and gas assets in the U.S. Political tensions with Australia and Canada also played a role, they said.
The state oil and gas company hopes to sell some of these assets in the next two years. These assets have lost billions of dollars and are in places where the company can't easily compete.
"Both Arrow Energy and Browse, which are Australian gas companies, are seen as some of PetroChina's worst investments. "CNPC also doesn't have much of a competitive edge in this area," said one of the sources.
In 2010, PetroChina and Shell formed a joint venture and bought Arrow Energy for $2.5 billion. This was PetroChina's first investment in Australia's coal seam gas industry. In 2013, it paid $1.63 billion to buy BHP's share of Browse, which is Australia's largest untapped gas resource.
The company also wants to sell the MacKay River Oilsands and Dover Oilsands projects in Canada, which it owns outright, because it has lost money making and processing the tar-like fuel into bitumen.
When asked for a comment, PetroChina did not give one.
In the first few years of the 2010s, China's state energy companies were among the most acquisitive in the industry. In 2013, CNOOC paid $15 billion to buy Canada's Nexen. But they calmed down after the oil price dropped in 2014 and 2015 and the government looked more closely at their finances.
The economy may have also made PetroChina think twice about its buying spree.
Arrow is the biggest overseas investment that PetroChina has lost money on. Browse is hard to build technologically, so it won't likely start making things until 2030, if it even gets final approval.
The 5-trillion-cubic-foot Surat Gas Project in Queensland won't be built until 2020, when Arrow made its final investment decision. Reuters says that it was slowed down by a disagreement between PetroChina and Shell over the price of gas to an export facility run by Shell.
Arrow lost about A$3.3 billion ($2.29 billion) between 2018 and 2021, including A$2.2 billion in write-downs.
When Reuters called Arrow, a spokesperson said, "Investment decisions of our shareholders are their business, and Arrow will not comment or speculate."
BROWSE
Since PetroChina joined the project, partners like BP, Shell, and Japan Australia LNG have spent more than $100 million on development studies for Browse. This includes a plan to build a $30 billion floating liquefied natural gas (LNG) project that was scrapped in 2016.
They are now looking at a $22 billion plan to use the field to feed the Karratha Gas Plant (KGP) in northwestern Australia when its original fields run out.
Browse operator Woodside has said that the project will only move forward if the partners can come up with a cost-effective way to capture and store carbon and if they can come to an agreement with the KGP owners on how to charge for tolls.
But one of the sources said that PetroChina doesn't like that cheaper plan.
"PetroChina expects a lot of uncertainty in the future because it has the least amount of shares and doesn't own the KGP plant further down the value chain," a source said.
OIL SANDS
In 2009, PetroChina paid Athabasca Oil Corp C$1.9 billion ($1.48 billion) for a 60% stake in the Dover and MacKay River projects. In 2012 and 2013, PetroChina paid the same amount for the remaining stakes in the projects.
The first phase of the MacKay project began in 2017 with 35,000 barrels per day (bpd) of bitumen and reached a peak of 150,000 bpd. According to the PetroChina Canada website, the Dover site is expected to produce 250,000 bpd of bitumen in the long run.
One source who knows about the possible divestment said that PetroChina is unhappy with the relatively high production costs of $70 per barrel at the projects and that local residents are unhappy with the environmental effects of both sites.
($1 = $1.4440 in Australia)
($1 = 1.2838 Canadian dollars)
