bus spec "expect t/overs rather than offtakes"

Wheels & Deals
8:25 AM, 14 May 2009 Michael Feller
BREAKFAST DEALS: Seismic shifts


– BG Group has signed a supply agreement with the China National Offshore Oil Corporation (BG changes tack, May 13) – the latest move in its emergence as a coal seam gas (CSG) superpower. But that position could be upset if a rumour about Royal Dutch Shell is true. It is thought that Shell will soon announce the construction of a four-train plant on Curtis Island, near Gladstone. This could mean one of two things: either Shell knows something we don't about Arrow Energy, of which it owns 30 per cent, or there's serious consolidation on the cards.


– Shell Australia chairman Russell Caplan recently indicated the company is interested in consolidation. A four train plant perhaps quantifies how much consolidation there would be: 100 per cent of Arrow Energy, Molopo Australia, Westside Corporation and Bow Energy would make four trains worthwhile, as would a contract with a major Chinese or Japanese power utility. How much gas is four trains worth? BG's two-train facility would have the capacity to produce about 7.4 million tonnes of LNG a year. Double that and that’s a lot of gas.


– Origin Energy, in partnership with ConocoPhillips is currently the only CSG player with enough gas to justify four trains. With their dominance and Santos/Petronas and BG Group/Queensland Gas consolidating their positions, Shell will need to move fast to get into the game before the final whistle. Expect takeovers rather than offtakes and key roles for JPMorgan, which advised Shell on its bid for Woodside Petroleum in 2001 and Wilson HTM, which advised Arrow on its bid for Pure Energy Resources.