An "International Oil and Gas Company" Bids for PNG

International interest in liquefied natural gas shows little sign of waning, with AGL Energy's stake in the Exxon Mobil-led LNG project in Papua New Guinea attracting a price well above market expectations.

AGL said yesterday an unnamed "international oil and gas company" had bid $1.1 billion for its 3.6 per cent stake in the PNG joint venture. This compared with market predictions the stake would fetch $900 million.

The sale is the final step in AGL's sell-off of "non-core" assets as it focuses on domestic energy operations. The managing director of AGL, Michael Fraser, described the sale as an "excellent outcome" after Tuesday's agreement to sell its 22 per cent holding in Queensland Gas to BG Group for $1.18 billion.

"Coming on top of the announcements earlier this week in relation to our QGC investment, we now have considerable balance sheet strength and strategic optionality across our retail, merchant, and gas and power development business," Mr Fraser said.

Industry sources said the bidder was unlikely to be a big international player because of the small size of the deal, and the offer could have come from a smaller company in the region with LNG aspirations.

Analysts at Citi recently reported that an Italian energy company, Eni SpA could be interested in the assets. Eni was not available for comment.

Other partners in the PNG project now have a chance to match the offer over the next 30 to 45 days, under a pre-emptive rights agreement. The project operator, Exxon Mobil, has a 41.5 per cent stake, followed by Oil Search, which has 34 per cent.

The managing director of Oil Search, Peter Botten, said the price was "reasonably high", but he did not say if the company would exercise its pre-emptive rights. "I think this is a very good price, and it establishes a benchmark for the oil and gas assets in that area," he said. The company would examine the details of the bid and discuss it with project partners, taking a "conservative approach" in its assessment.

An analyst at ABN Amro, Jason Mabee, said market turmoil and oil price falls may have lowered AGL's hopes for the PNG asset. The transaction allows AGL plenty of scope to expand, which could include exercising options to buy gas fields from QGC or NSW electricity retail assets likely to be privatised. "We continue to like the moves that Fraser is making to reshape AGL going forward and this is obviously a fantastic point in the cycle to be sitting on balance sheet capacity," Mr Mabee said.

AGL shares gained 15c, or 1 per cent, to $13.90 and Oil Search shares were up 59c, or 16 per cent, to $4.30.

Author: Jo Amey