PetroChina Drops WestSide Offer in ‘Difficult’ Australian MarketJames Paton
PetroChina Co., Asia’s biggest oil and gas producer, dropped a bid to acquire WestSide Corp. as a strong Australian dollar and rising costs discourage resources projects in the country, the Brisbane-based explorer said.
PetroChina, a partner in the proposed Arrow liquefied natural gas development in Queensland state with Royal Dutch Shell Plc, withdrew its offer for the coal-seam gas explorer “because the general situation in Australia has changed so much,” WestSide said today in a statement.
Australia’s energy and mining projects have been hit by a high local currency and increasing costs. Woodside Petroleum Ltd., Australia’s second-biggest oil producer, scrapped a plan last month to build the Browse LNG project on the Western Australia coast, while Glencore Xstrata Plc, the world’s biggest shipper of thermal coal, yesterday halted work on the Balaclava Island export terminal in Queensland.
“Anybody who has got to go to a final investment decision on a new project today in the Australian market is not excited by the prospects,” WestSide’s Executive Chairman Angus Karoll said today in a telephone interview. “Whether you are PetroChina, Xstrata or Woodside, it’s a difficult market to make a significant investment decision.”
Mao Zefeng, PetroChina’s Beijing-based spokesman, did not answer two phone calls to his office nor an e-mail seeking comment.
WestSide received a takeover offer of 52 cents a share that valued the company at about A$185 million ($184.4 million), it said Nov. 20, without identifying the bidder.
Australia’s dollar dropped below parity with its U.S. counterpart on May 10 for the first time in more than 10 months. The so-called Aussie’s stretch above parity was the longest since exchange controls were scrapped in 1983 and has made local costs more expensive to foreign investors.
Companies from Chevron Corp. to BG Group Plc have announced cost overruns at their Australian LNG projects. Perth-based Woodside is considering a floating LNG project as an alternative for Browse as onshore costs climb.
PetroChina last year acquired Melbourne-based Molopo Energy Ltd.’s coal-bed methane holdings in Queensland for A$43.4 million. The Chinese company plans to supply the gas to Liquefied Natural Gas Ltd.’s proposed Fisherman’s Landing export venture, the Perth-based company said in August.
Shell has delayed a decision to go ahead with the Arrow LNG project amid cost inflation in Australia, Chief Financial Officer Simon Henry told reporters on May 2. The company said in November that it may delay until 2014 a decision on whether to go ahead with the Arrow development.
WestSide, which has a market value of A$89.7 million, operates fields in Queensland about 160 kilometers (100 miles) west of Gladstone, where BG Group, ConocoPhillips and Santos Ltd. are building more than $60 billion of LNG projects to export the fuel to Asia.