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Herald Sun (Australia): Chinese interest sends Oil Search shares soaring

Article from: Felicity Williams with Bloomberg
September 18, 2007 12:00am

KEEN Chinese interest in winning access to rich gas projects in Papua New Guinea sent Oil Search shares rocketing almost 12 per cent yesterday.

Oil Search is the biggest owner of natural gas resources in PNG under joint ventures led by ExxonMobil and BG Group.

The South China Morning Post reported yesterday that CNPC Exploration — a partnership between China Natural Petroleum Corp and PetroChina — was considering offering as much as $US5 billion ($A5.94 billion) for Oil Search.

The report said European parties were also interested in acquiring the company.

Oil Search said it had not received a formal approach from any party, but added that it was in discussions with “a number of international companies” about potential participation in a range of proposed gas developments in PNG.

“We’ve not received any formal or informal approaches to buy the company,” Oil Search managing director Peter Botten told BusinessDaily.

However, it is believed that several parties have asked the PNG Government, which holds an 18 per cent stake in Oil Search, if it is willing to sell its stake in the company.

CNPC and PetroChina, as well as Italian energy group Eni, are among the companies that are believed to have talked to the PNG Government.

Oil Search shares surged 45 or just under 12 per cent to $4.30, as investors seized on the rumours.

Goldman Sachs JBWere energy analyst Anthony Bishop said China needed more gas to meet expected growth in its receiving terminals and one way it could do this was to buy uncommercialised gas resources.

“It seems to be a natural progression we’re seeing in the markets — first agreements, then assets and now potentially companies,” he told BusinessDaily.

“I see no reason why they can’t take this next step given their ability to fund these types of acquisitions.”

The rumoured Chinese interest in Oil Search could also shake out other potential buyers, Mr Bishop said.

The Chinese interest in Oil Search follows several big LNG supply deals signed between Australian producers and Chinese buyers coinciding with the APEC summit earlier this month.

During APEC, Woodside Petroleum signed a preliminary agreement with PetroChina for sales of between two million and three million tonnes of LNG per year for 15 to 20 years. If it goes ahead, the contract will be worth between $35 billion and $45 billion, making it the biggest single export deal by an Australian company.

The day before, PetroChina signed an offtake agreement with Shell for the supply of one million tonnes of LNG per year over a 20-year period.

Analysts have described the recent deals as “the tip of the iceberg”.

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