Qatar Petroleum International (QPI) last week secured a multilateral agreement with long-time partner ExxonMobil Corp. to explore North America's unconventional natural gas, associated gas and export potential. In addition, a newly established partnership between UK utility Centrica plc and QPI clinched a $986 million agreement to buy a package of Suncor Energy's onshore gas-weighted properties in the Western Canadian Sedimentary Basin.
The dual transactions would be a positive turnaround for the state-owned QPI. The conglomerate, which a decade ago had eyed North America as an import destination for its massive gas resources, has been working on alternatives routes for majority-owned Qatargas, the largest liquefied natural gas (LNG) operator in the world.
QPI and the U.S. oil major agreed through a memorandum of understanding (MOU) to jointly evaluate North America's unconventional natural gas, associated liquids resources, as well as global opportunities for LNG. The MOU "signifies our joint interest in expanding our partnership both domestically and internationally in order to address the growing and evolving role of natural gas, which continues to play a larger role in meeting the needs of an increasing population," said CEO Nasser Al-Jaidah. No transactions have been set yet, he said.
"This investment in the Western Canadian Sedimentary Basin is a significant step in the development of QPI's global upstream business," said Al-Jaidah. "We look forward to continuing to advance QPI's overall North American energy business through the memorandum of understanding and other initiatives."
A decade ago QPI and ExxonMobil agreed to spend $12 billion to build facilities to import an estimated 2 Bcf/d to U.S. shores over a 25-year period (see NGI, Oct. 23, 2003). ExxonMobil at that time was eyeing four U.S. import and regasification sites. Two years later they launched Qatar-based Ras Laffan LNG, a $14 billion project that included two LNG trains totaling 15.6 million metric tons/year (mmty) of LNG. By then they were well on their way to building the Golden Pass LNG terminal near Sabine Pass, TX. Golden Pass's import potential is no longer golden. Today QPI and ExxonMobil today hold a permit from the U.S. Department of Energy that allows LNG exports to free-trade countries (see NGI, Oct. 15, 2012). The proposed project now on the table would be able to send out around 15 mmty.
The Suncor properties are spread across close to one million acres, with proved and probable reserves of about 978 Bcfe, 90% weighted to gas in Alberta (AB), northeast British Columbia (BC) and southern Saskatchewan. The acquired assets would be 60% owned and operated by Centrica, while QPI would own the remaining stake.
"I am delighted to achieve our first investment with QPI under the memorandum of understanding, and the establishment of a new partnership in North America," said Centrica CEO Sam Laidlaw. "The acquisition provides attractive returns in a region we know well, and significantly increases the size and quality of our portfolio. It also presents exciting development opportunities, with the potential to improve returns further."
The move would help Centrica secure gas supplies for its North American retail operator Direct Energy, as well as help develop resources internationally to reduce its exposure to price movements in the wholesale gas market, management noted. Centrica said the Suncor assets were bought at a discount of between 10% and 12% to the average price paid for similar gas assets in Alberta since January 2012.
With the Suncor transaction, Centrica gains gas supplies for Direct Energy, its North American retail unit. Centrica earlier this year said it would no longer invest in new nuclear power plants in the UK, freeing up funds for alternative investments. Once the Suncor transaction is completed, Centrica said it would be able to cover around 60% of Direct Energy's unregulated daily gas requirements.
"Growing our upstream gas operations is an important step to ensuring the company is a solid long-term partner to millions of residential and business customers across North America," said Centrica Senior Vice President Wes Morningstar.
The deal give oilsands giant Suncor room to breathe as it repairs its balance sheet in the wake of canceling the centerpiece of its long-planned $20 billion bitumen expansion, the Voyageur Upgrader, in March. CEO Steve Williams noted then that over the past three years "market conditions have changed significantly," in large part because of the growth in tight oil and shale production in the Lower 48 states. Not included in the sale are most of Suncor's unconventional natural gas properties in BC's Montney Shale and the Wilson Creek, AB unconventional oil assets.
The deal is equivalent to 78% of Suncor's 1.13 Tcf of natural gas reserves, but is only a fraction of Suncor's overall proved and probable energy resources, most of which are crude oil.
The sale, expected to close later this year, is subject to regulatory approval, including under the Investment Canada Act and Competition Act. Suncor plans to adjust its North American onshore production guidance once the transaction is completed.
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