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CNPC Said to Bid for Stake in Woodside’s Gas Venture

China National Petroleum Corp., the country’s biggest energy producer, offered to buy a stake in Woodside Petroleum Ltd. (WPL)’s Browse liquefied natural gas project in Australia, two people with knowledge of the matter said.

State-controlled CNPC made a binding bid for as much as 15 percent of the venture comprising two natural gas areas off Western Australia’s coast, one of the people said, asking not to be identified as the sale process is confidential. The stake may be worth up to $1.5 billion, based on Citigroup Inc. estimates.

China is buying energy assets abroad and developing shale- gas resources at home to fuel expansion in the fastest-growing major economy. CNPC is the only Chinese company seeking a stake in Browse, estimated to cost $36 billion, and faces competition from rivals from Japan, Taiwan and South Korea, the people said.

“Given the growth in China’s gas market and the view that shale gas in China will probably take time before we see material volumes, there’s a gap in terms of supply and demand that needs to be filled,” Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., said by telephone today. “So, China is exploring its options.”

Woodside may reduce its ownership of Browse as the company increases exploration spending and seeks opportunities to expand in LNG and oil outside Australia, Chief Executive Officer Peter Coleman said on a call with analysts today. The company’s discussions to sell part of its Browse holding are “maturing,” he said, when asked if CNPC had bid for a stake.

‘Strong’ Interest

“The interest has been strong I can say, and we’ll know over the next few months exactly what we’re doing in that space,” Coleman said after the gas producer reported a 4 percent decline in full-year profit.

Liu Weijiang, a Beijing-based spokesman at CNPC, said he was unaware of any deal with Woodside, declining to comment further.

Woodside today increased the estimate for its natural gas resources in the Browse Basin by 17 percent to 15.5 trillion cubic feet (439 billion cubic meters), according to a presentation by the Perth-based company. Australia’s second- largest oil producer owns 46 percent of the Browse project.

Shares of Woodside rose to the highest in six months, climbing 2.5 percent to close at A$36.86 in Sydney. The stock recorded its biggest gain since Jan. 11, while the benchmark index was little changed.

CPC, Mitsui

Coleman had said in August the company may sell stakes in its Browse and Pluto LNG ventures to help fund the developments. Browse may cost $36 billion to build, compared with an earlier estimate of $30 billion, Credit Suisse Group AG said in November.

CPC Corp., Taiwan’s state-owned oil refiner, said Feb. 8 that it is in talks with Woodside to buy a stake of less than 10 percent in Browse and is negotiating details of an LNG supply agreement. Mitsui & Co. is also interested in buying a stake in the venture, according to a spokesman for the Japanese trading company.

Osaka Gas Co. hasn’t bid for a stake in Browse, spokesman Jun Kumagai said by telephone, when asked to comment on a Reuters report that the Japanese gas distributor was among companies that had submitted offers. The utility had indicated an interest in acquiring a stake in the venture about a year ago and is currently not in talks with Woodside, he said.

Woodside has said it’s received interest from potential buyers of a minority stake in Browse, without identifying them. The company said today it expects to reach a final investment decision on the proposed venture in the first half of 2013.

Stake Valuation

The Australian company may fetch $1.6 billion selling 16 percent of Browse and lowering its holding to 30 percent, Citigroup estimated on Jan. 27.

“Woodside’s 46 percent interest in the Browse resource is valuable, despite ongoing challenges with the project,” Mark Greenwood, a Sydney-based Citigroup analyst, wrote in the report.

Woodside’s Coleman declined to say how much of the venture the company may sell.

That’s “the question everybody would like to know,” he said after the company reported its 2011 net income dropped to $1.51 billion. “We have a firm view on it. We know what that number is, but I don’t think it’s appropriate to share.”

Chevron Corp. (CVX), Royal Dutch Shell Plc (RDSA), BP Plc and BHP Billiton Ltd. are the other partners in Browse.

As Woodside attracts Asian interest in Browse, the Australian company is considering expansion overseas through new partnerships and “casting a very broad net,” Coleman said. While the energy producer is studying shale and coal-seam gas, it intends to keep the focus on LNG and oil, he said.

Chinese Demand

CNPC aims to increase its overseas oil and gas production to 200 million metric tons by the end of 2015 from more than 100 million tons last year. The company has operations in countries including Venezuela, Peru and Ecuador.

“CNPC would be interested in Australia because of its political stability and because of its experience in exporting LNG to China,” said Gordon Kwan, head of regional energy research at Mirae Asset Securities Ltd. in Hong Kong.

China buys the bulk of its LNG under multi-year contracts from Indonesia, Malaysia, Qatar and Australia. LNG is natural gas chilled to liquid form, reducing its volume for shipping to destinations not connected by pipeline.

PetroChina Co., its Hong Kong-listed unit, plans to spend at least $60 billion this decade on global acquisitions to build oil and gas reserves and meet domestic demand. China, the world’s biggest energy user, is seeking to triple the use of gas by 2020 to about 10 percent of total consumption to reduce reliance on more polluting coal and oil.

To contact the reporters on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net; James Paton in Sydney at jpaton4@bloomberg.net

To contact the editors responsible for this story: Amit Prakash at aprakash1@bloomberg.net; Philip Lagerkranser at lagerkranser@bloomberg.net

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