Gas deal to boost PetroChina
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PetroChina Co. is to pay C$5.4 billion (US$5.4 billion) for a 50 percent stake in a shale gas project operated by Canadian firm Encana Corp.
The deal for a half share at Encana's Cutbank Ridge significantly adds to China's "unconventional" gas investment in North America.
Together with Chinese offshore energy producer CNOOC's recent stake purchases in shale oil and gas development projects in the United States, this will enable China to acquire quick exposure to the long-term shale oil/gas boom in North America.
It also brings the potential to migrate the technology back home to develop similar resources domestically, analysts said.
Shale resources, or oil and gas-bearing rocks underground, had been uneconomical to extract until advanced technologies were deployed in the US in recent years.
PetroChina and Encana also agreed to form a 50-50 joint venture to increase gas production in Cutbank Ridge, the two firms said yesterday.
PetroChina said it "expects the joint venture to provide a platform for entering the major market in North America."
Cutbank Ridge, comprising 635,000 acres in the British Columbia and Alberta boundary, currently produces 255 million cubic feet of gas a day from proved reserves of about 1 trillion cubic feet. This includes shale gas formations and conventional resources.
Mirae Asset Securities analyst Gordon Kwan said the deal would increase PetroChina's global gas production by 500 million cubic feet daily - 83,300 barrels of oil equivalent daily at peak capacity - about 2 percent of PetroChina's 2011 oil/gas output.
BOC International analyst Liu Zhicheng wrote in a note that PetroChina may need to sell debt or issue shares to fund the deal.
"Taking into account financing costs, the deal won't have significant impact on (PetroChina's) earnings in short term," he said.
The deal requires regulatory approval by Chinese and Canadian authorities.
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