18/11/2010 - 00:00

Japanese interests may target NWS

18/11/2010 - 00:00

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ALL eyes were on BHP Billiton chief Marius Kloppers this week for hints that the resources giant is eyeing a move on North West Shelf operator Woodside, following Shell’s decision to sell 10 per cent and field offers for its remaining 24 per cent interest

Japanese interests may target NWS

ALL eyes were on BHP Billiton chief Marius Kloppers in Perth this week for hints that the resources giant is eyeing a move on North West Shelf operator Woodside, following Shell’s decision to sell 10 per cent and field offers for its remaining 24 per cent interest.

Mr Kloppers refused to comment on whether BHP was interested in Woodside, but it is universally considered the most politically acceptable potential bidder for Australia’s national oil and gas champion.

However, little attention has been paid to the possibility that LNG customers, most likely from Japan and China, could instead swoop on a strategic minority interest.

Some analysts now believe that such a move is a growing possibility as a means of ensuring security over future supplies of LNG and obtaining a stake big enough to thwart any full takeover of one of Asia’s most important independent energy suppliers.

ANZ head of commodities research Mark Pervan said such an outcome was definitely possible, especially by major Japanese energy utilities, which had long underwritten new Australian LNG supplies as foundation partners and customers.

“The Japanese have a history of joint ventures in a lot of the big resources projects here, and an opportunity like this doesn’t come by too frequently ... so it’s likely they will be running a ruler over it,” Mr Pervan said.

“Security of supply is increasingly becoming an issue today ... with both China and India now big players in the market, and the Japanese would be very conscious of this.

“The LNG market is critical in Japan, so it makes a lot of sense for them to be close to any deals. This is an important strategic commodity to them, and the Japanese have shown in the past they are very keen to take some sort of equity ownership in these assets.”

Japanese traders Mitsui and Mitsubishi already jointly own a one-sixth interest in the North West Shelf, while fellow shelf customers Tokyo Gas and Kansai Electric have jointly secured a 10 per cent stake in Woodside’s new Pluto LNG venture, in addition to offtake contracts.

Similarly, Tokyo Gas and Tokyo Electric own direct stakes in the Bayu-Undan LNG project in the Timor Sea, while Osaka Gas owns a 10 per cent stake in the Woodside-led Sunrise LNG venture nearby.

Japanese buyers were also the first to become foundation investors in Chevron’s Wheatstone and Gorgon projects, outpointing their Chinese counterparts whose negotiations typically became bogged down by their efforts to obtain lower gas prices.

Independent Perth resources analyst Peter Strachan echoed those views, notwithstanding Japanese companies’ general preference to invest directly in projects or secure offtake deals.

“As times change, (that) strategy may make sense,” Mr Strachan said, adding that such a deal would also be less concerning for politicians “so long as the holder did not have conflicting interests with those of Woodside or Australia”.

On the flipside, one Perth energy executive with close ties to Japan said such a move would require a significant change of strategy, and questioned whether Japanese utilities currently had either the funds or the nerve to make such a bold investment.

With China also vying for greater energy security, Chinese gas buyers could also be eyeing a strategic minority stake in Woodside.

Critically, if different customer groups were to separately acquire stakes jointly exceeding 10 per cent, no competitor would be able to achieve compulsory acquisition in the event it made a bid for Woodside.

Mr Pervan said that could be especially appealing to local politicians, as it would both allow increased foreign investment and lessen the risk of Woodside falling to overseas control.

 

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