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The Wall Street Journal: Shell May Sell Oil Assets

Cnooc Is Likely Bidder
For Stake in Project
On North West Shelf

By DAVID WINNING and BENOÎT FAUCON
November 15, 2007; Page A16

Royal Dutch Shell PLC is considering the sale of its oil assets in Australia’s North West Shelf, two people familiar with the matter said, in a move that is likely to attract Chinese interest.

Shell is examining the potential value of its 16.67% stake in the oil-output arm of the North West Shelf project, namely the Cossack Pioneer field, which produces 100,000 barrels of crude a day, the people said.

Another person said Cnooc Ltd. has hired Macquarie Group Ltd. to examine a possible bid for Shell’s oil assets in the North West Shelf, and the major Chinese oil producer may pitch an offer of about $450 million.

A disposal would free up Shell to focus on its Australian natural-gas business, which includes the giant Gorgon gas field — located off the coast of Western Australia state — that recently won federal approval.

According to one of the people, Shell isn’t in active talks to sell the stake and is still considering its exit plan. The Anglo-Dutch oil major has said it expected to offload about $9 billion in assets in 2007.

Shell spokeswoman Anita Harben declined to comment on whether the company’s North West Shelf oil assets could be sold, saying such issues were commercially confidential.

“Portfolio management is a key source of value creation for Shell. We continue to focus our portfolio on strategic assets and remain committed to liquefied-natural-gas growth in Australia,” Ms. Harben said.

Cnooc spokesman Xiao Zongwei also declined to comment, while a spokesman for Macquarie wouldn’t comment.

The North West Shelf project is operated by Woodside Petroleum Ltd. and counts BHP Billiton, BP PLC, Chevron Corp. and Japan Australia LNG as equal shareholders in addition to Shell.

It isn’t known whether any of the parties has a pre-emptive right to buy another shareholder’s interest in the venture should it be marketed.

Cossack Pioneer began producing oil in 1995 after the first commercial oil discovery was made off the North West Shelf in 1989. Ten production wells have been drilled in water 80 meters deep.

Crude-oil output at the North West Shelf has been declining in recent years, with a total of 31.4 million barrels produced in 2005 compared with 39.3 million barrels two years earlier.

Chinese interest comes a month after Yang Hua, Cnooc’s chief financial officer, pinpointed the Asian-Pacific region as one of two areas where Cnooc wanted to build its core business.

The Chinese company already has a 25% stake in a venture that was established to deliver LNG from the North West Shelf to China’s LNG terminal at Dapeng in the southern province of Guangdong.

In July, Cnooc enlarged its footprint in Australia by securing a permit to explore the Bonaparte Basin off Western Australia.

–Stephen Bell and Rebecca Thurlow contributed to this article.

Write to David Winning at [email protected] and Benoît Faucon at [email protected]

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