PetroChina buys into Australia LNG project

Asia's largest oil producer seeks to increase its energy assets abroad

Asia's biggest oil producer PetroChina Co Ltd agreed to buy BHP Billiton Ltd's shares of liquefied natural gas project in Australia at a price of $1.63 billion - the biggest overseas acquisition by the company this year - to further expand its foreign assets.

International mining giant BHP announced on Wednesday that it will sell its 8.33 percent interest in the East Browse Joint Venture and 20 percent interest in the West Browse Joint Venture, located off western Australian, to the Chinese oil and gas company.

The deal is expected to be completed by the first half of 2013, the statement said.

It will help PetroChina enlarge its overseas energy assets even though it is an LNG project, said Wang Hui, an analyst at chem365.net, an online information provider for the petrochemical industry.

She said the company's overseas businesses are currently mainly in Asia. The deal will definitely help the company diversify its businesses by acquiring assets in other parts of the world.

PetroChina Chairman Jiang Jiemin said earlier this year that the company will invest at least $60 billion this decade in global oil and natural gas assets to increase its share of overseas output to half of its total by 2020.

This is the first time that the company has stepped into western Australia's offshore natural gas industry.

The Browse project has natural gas reserves of about 15.5 trillion cubic meters and is expected to start production in 2018 at the earliest.

China is trying to reduce carbon emissions by increasing the use of clean energy, and the country is making more efforts on LNG development as its appetite for natural gas rapidly grows.

Natural gas output this year is estimated at 107.7 billion cubic meters, a 5 percent rise compared with last year, and consumption is expected to reach about 147.68 billion cubic meters, a 13 percent increase compared with last year, according to the energy information consultancy ICIS C1 Energy.

Meanwhile, the country's natural gas imports have maintained fast growth. It imported about 40 billion cubic meters of natural gas this year with an annual growth rate of 35.7 percent, C1 Energy said.

Chinese traders are turning to foreign sellers for LNG because of a domestic supply shortage, C1 Energy said on Wednesday.

It said the domestic LNG resources cannot meet the demand from downstream buyers.

Given this situation, the Chinese energy company has been expanding its LNG businesses overseas.

PetroChina announced in May that it would jointly develop a proposed LNG export facility in Canada with Shell Canada Ltd, Korea Gas Corp and Mitsubishi Corp.

The project, located near Kitimat, British Columbia, will initially consist of two LNG processing units, each with the capacity to produce 6 million metric tons of LNG annually, with an option to expand the project to a total of 24 million tons a year.

The seller, BHP, is facing falling iron ore demand globally, especially from the biggest consumer China.

"The iron ore industry is in a declining path globally," said Zhang Tieshan, an analyst from steel information provider Mysteel.com. "Many global iron ore miners are cutting their investments in order to be more focused on their profitable businesses."