Wednesday, 18 July 2012

Thai Firm to enter east Africa's exploration industry

Thailand’s PTT E&P is poised to enter the east African LNG exploration industry if she pays some US$1.9 billion to takeover of Cove Energy Plc. after Royal Dutch/Shell bowed out of a five-month bidding war. PTTE&P had outbid Shell/BP by more than $300 million.

This acquisition will give PTT Exploration and Production exposure to the giant offshore discoveries made in East Africa in the past year. The region is emerging as a future LNG and crude oil giant and is well-situated to export into Asia.

Cove owns an 8.5 percent stake in a Mozambique license in the Rovuma offshore basin containing gas discoveries that could be a major provider of liquefied natural gas (LNG) to energy-starved Asia. She also has a 10 per cent stake in Ruvuma offshore. In Kenya, Cove Energy Plc. has a 10 per cent in offshore area 1.5; 10 per cent in 17; 25 per cent in 1.10A; 15 per cent in1.10B and a 10 per cent in 1.11A.

Shell quit the bid because they did not to pay for an overpriced bid, the company said.  PTT E&P price is said to be a premium. Shell could have found another suitor given that the fuels exploration field is awash with potential suitors.

 WE could be witnessing a repeat of the ATC privatisation saga in 2002. Both Kenya Airways and South Africa Airways were determined to control the Tanzanian Airspace for different reasons.  SAA was looking for a hub inland  while KQ was determined to keep competition at bay. So both outbid each other for a single plane airline, pushing the price tag to US$20 million.

South Africa Airways was determined to buy ATC and did everything, including political lobbying, to ensure that the deal did not go to KQ.   Sensing danger, KQ employed abit of guerilla tactics-. KQ sought and found a different suitor in the form of Precision Air, then pulled out of the ATC deal at the last minute. SAA became the only suitor but the marriage never lasted.

Shell, like KQ, has much at stake in the LNG market, hence its strong desire to get involved in potential new supplies.  Being one of the most experienced international majors, Shell is likely to find another suitor. Analysts point at a possible marriage between Shell and U.S. explorer Anadarko which has a 36.5 percent stake in the Mozambique license, but little experience of LNG.

Other points of entry to east Africa for Shell could include tie-ups with Italy's ENI, which has also found gas in Mozambique, or BG Group and Exxon Mobil, which have discoveries off the coast of Tanzania.

Analysts said PTT E&P would need to invest $1 billion-$1.5 billion into the project annually over the next few years.

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