Suncor Energy agreed Monday to sell onshore natural gas-weighted properties in the Western Canadian Sedimentary Basin for US$986 million to a newly established North American partnership between UK utility Centrica plc and Qatar Petroleum International (QPI). The estimated one-million acre-leasehold this year is expected to produce about 250 MMcfe/d.
The properties have proved and probable reserves of about 978 Bcfe, 90% weighted to natural gas, and are in Alberta (AB), northeast British Columbia (BC) and southern Saskatchewan. The acquired assets would be 60% owned by Centrica and 40% owned by QPI; Centrica would be the operator.
“I am delighted to achieve our first investment with QPI under the memorandum of understanding [MOU], 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 more gas supplies for its North American retail operator Direct Energy and 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.
The transaction, and another announced later on Monday with ExxonMobil Corp., give QPI more leverage in North America’s gas markets. The state-owned oil and gas conglomerate has been working on alternatives for its massive liquefied natural gas (LNG) business, run by majority-owned Qatargas, the largest LNG operator in the world. QPI a decade ago had been laying plans to export LNG to North America; now it is working on plans to assist in exports from North America.
“This investment in the Western Canadian Sedimentary Basin is a significant step in the development of QPI’s global upstream business,” said CEO Nasser Al-Jaidah. “We look forward to continuing to advance QPI’s overall North American energy business through the memorandum of understanding and other initiatives.”
QPI in 2012 joined long-time partner ExxonMobil to seek a permit from the U.S. Department of Energy to export gas from the Golden Pass LNG receiving terminal at Sabine Pass, TX (see Daily GPI, Aug. 21, 2012). On Monday the partners in Berlin, Germany announced an MOU to jointly evaluate North America’s unconventional natural gas and associated liquids resources, as well as global opportunities for LNG.
QPI and ExxonMobil now partner in LNG ventures in Qatar, the UK and in Italy. The new 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 Al-Jaidah. No transactions have been set yet, he said.
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.
The purchase marks the first made under an agreement Centrica signed with Qatar officials in December 2011 to join forces to grow internationally.
“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.
Monday’s “announcement is further proof of our commitment to capital discipline and aligning assets with strategic objectives,” said Williams. “We will continuously review and refine our portfolio of assets to ensure we are investing in projects that deliver profitable growth and strong returns for our shareholders.”
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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