December 6, 2012 7:51 pm

BG eyes Australian asset sales

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BG Group is exploring selling more assets linked to its $20bn natural gas development in Australia, in yet another move to unlock capital that would help finance its spending commitments.

The UK listed oil and gas explorer, which lost a fifth of its value after it cut its global production forecast last month, has been examining a potential sale of some of its infrastructure assets linked to its Queensland Curtis LNG project, one of BG’s largest investments, several people familiar with the plans said.

The assets that could be put up for sale include a 540km pipeline that will deliver gas to a plant on Curtis Island for conversion into liquid natural gas, two of the people said.

“BG would like to unlock capital from non-strategic assets. It needs capital to invest in key assets,” said one industry adviser.

BG is entering the final stages of a $20.4bn capital spending project at Curtis Island, which has suffered from cost overruns.

In October it provisionally agreed to sell a stake in the project to Beijing-backed oil group Cnooc, raising $1.93bn. That sale did not include infrastructure assets, that account for about 30 per cent of the budget cost, or roughly $6bn.

One of the people familiar with the sale talks said the asset sale could reap up to $1bn. Analysts at Citi in a research note estimated that had Cnooc hypothetically acquired the infrastructure also, the transaction would have been an estimated $2.5bn rather than $1.93bn.

It is not yet fixed whether a sale will go ahead, one of the people said.

BG would not comment but said it keeps all the assets in its global portfolio under review.

“We keep all options open; nothing is sacrosanct,” it said, adding: “We’re confident BG Group is soundly financed to deliver its global growth programme.”

The Curtis Island plant, which is scheduled to start exporting gas in 2014, will be among the first in the world to produce LNG from coal-bed methane, a type of natural gas found in coal seams.

Earlier this year, BG said it would continue with the execution of its portfolio rationalisation programme over the next one to two years, disposing of power plants, transmission & distribution and regasification assets.

BG’s “total capital release” from these sales will be $7.6bn by mid 2013, outstripping an original $5bn target. The group has not said whether it will extend the program further.

BG has made other disposals this year including its 65 per cent stake in Gujarat Gas to India’s Gujarat State Petroleum Corporation for Rs24.6bn ($470m). Before that, the FTSE 100 oil and gas producer disposed of a 60 per cent stake in Brazilian gas distributor Comgás to Brazilian group Cosan for about $1.8bn.

Last year BG held talks over a potential sale of a stake in its Brazilian business, which ultimately ended over price, people familiar with the talks said at the time. The talks were over a 20 per cent stake for about $14bn, two people with knowledge of the talks said. BG declined to comment.

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