Malaysian state oil company Petro-nas will buy a 40 per cent stake in Australian energy firm Santos Ltd's Gladstone liquefied natural gas project for up to $2.51 billion, to bolster its position as Asia's largest LNG producer as competition heats up, GN reported.
State-owned Petronas' investment in the project, which plans to use coal seam gas as feedstock, follows a $12 billion takeover bid last month by Britain's BG Group Plc for Australia's Origin Energy Ltd, and is considered a vote of confidence for Asia's young coal seam gas industry.
Santos shares, which have surged 51 per cent so far this year, jumped 15 per cent to a record A$21.75 yesterday before settling at A$21.08, up 11.1 per cent.
"As for Santos, on first glance it looks like they've got an excellent deal," said Aiden Bradley, an oil and gas analyst at ABN Amro in Sydney.
"For Petronas, their LNG production in Malaysia is not growing, so this is part of their strategy to diversify in Asia."
The deal marries Santos' reserves with the marketing power of Petronas, the third-largest LNG producer in the world.
The acquisition is Petro-nas' first investment in coal seam gas, its first foray in Australia and, according to Dealogic, its biggest overseas acquisition.
Petronas will make an initial cash investment of $2.01 billion, and a further $500 million on reaching a final investment decision for a second LNG train at the Gladstone project in Australia's Queensland state, Santos said.
With oil prices soaring and buyers looking for cleaner-burning fuel, global LNG demand is forecast to rise to nearly 400 million tonnes per annum (mtpa) in 2020, up from 172 mtpa in 2007.
Asian demand, which accounts for two-thirds of global LNG consumption, could grow to just above 200 mtpa in 2020.
Under the agreement, Santos and Petronas will form a joint venture company to develop and operate a 450-km gas pipeline and an LNG plant at Gladstone.