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PetroChina Takes Stake in Shell's Groundbirch Gas Prospect

PetroChina Co. is buying a 20% stake in one of Royal Dutch Shell plc's unconventional natural gas prospects in northeastern British Columbia, known as Groundbirch, officials confirmed Thursday. The deal is estimated to be worth at least US$1 billion.

The China National Petroleum Corp. (CNPC) subsidiary disclosed Tuesday that it had a binding agreement for shale gas assets in Canada, and on Thursday Shell confirmed that it was the seller.

"I can confirm that CNPC will join us in Canada," said Shell CEO Peter Voser. "We agreed on a global partnership last year, and this forms a part of that." Voser declined to provide financial details of the transaction. However, several analysts pegged the deal's worth to be at least $1 billion.

Shell owns 100% of the Groundbirch prospect, whose current output is averaging 125 MMcf/d. According to Shell, Groundbirch has the potential to produce 1 Bcfe/d with an estimated producing life of 40 years.

The deal is expected to leverage PetroChina's drilling expertise, which it then can transfer to prospective unconventional targets in China.

"PetroChina and Shell intend to further advance the exchange of technology in the development of unconventional gas," the Hong Kong-based producer said. "Furthermore, PetroChina hopes to achieve reasonable returns from the investment."

The transaction is the second in Canada by PetroChina in less than a month. Early last month it paid Athabasca Oil Sands Corp. an estimated US$669 million to buy an additional 40% interest in the MacKay River oilsands project in Alberta. PetroChina in 2009 had paid about US$1.8 billion to buy a 60% stake in two oilsands projects owned by Athabasca Oil Sands. The northern Alberta project is scheduled to ramp up in 2014 with production in phase one estimated at 35,000 b/d of oil. The project eventually is to produce an estimated 150,000 b/d.

Last year Encana Corp. ended talks with PetroChina to jointly develop a Cutbank Ridge leasehold, which straddles the borders of northeastern BC and northwest Alberta (see Shale Daily, June 22, 2011). The partnership had been valued at about US$5.4 billion and was one of the biggest proposed transactions announced last year in North America. The potential partners apparently were unable to come to terms on key elements of the agreement, including a joint operating plan.

Canadian Prime Minister Stephen Harper is scheduled to visit China in the next few days and is "very serious" in proceeding with negotiations to sell more of his nation's oil and gas to Asia Pacific countries, he said. The visit comes on the heels of a decision by the Obama administration last month to deny approval -- for now -- of the Keystone XL oil pipeline, which would move crude along a 1,700-mile link from Alberta to the Gulf of Mexico (see Shale Daily, Jan. 19).

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