Woodside Needs Keys 6,500 Miles Apart
The keys to what would be the biggest energy takeover in the Asia-Pacific region are separated by 6,500 miles and billions of dollars in GDP.
Woodside Petroleum Ltd. needs support from both Papua New Guinea and Abu
Dhabi for the success of its A$11.65 billion ($8.1 billion) bid for Port
Moresby-based Oil Search Ltd.
Abu Dhabi-owned International Petroleum Investment Co., which invests globally in energy and related industries, has a 13 percent stake in the target and the PNG government has 9.8 percent. The prize is Oil Search’s slice of Exxon Mobil Corp.’s $19 billion liquefied natural gas export project in PNG, which started production last year.
“Oil Search is a national champion,” Chris Flynn, a partner at the law firm Gilbert & Tobin in Sydney, said by phone. “This is one of their most-important assets in arguably the most-important sector, so they will look at it very carefully.”
Agreement from PNG is needed for any deal to go ahead, according to the statement Tuesday from Oil Search that revealed Woodside’s conditional offer. Oil Search has operated in Papua New Guinea since 1929.
Expansion of LNG exports, including the Exxon-led project, is forecast to provide a revenue boost to PNG, one of the world’s poorest nations. The government may block the bid if it decides it’s not in the national interest, said Flynn, who specializes in the energy industry.
Stumbling Block
“Relationships can be quite important,” Angus Nicholson, a market analyst at IG Markets Ltd. in Melbourne, said by phone. “If Oil Search has a good relationship with the PNG government, or if Woodside is not agreeable to them as a buyer, then that could be a bit of a stumbling block.”
Price is only one factor for PNG, which acquired shares in Oil Search last year at A$8.20 apiece compared with the A$7.65 a share value of Woodside’s bid as of Monday’s close.
Oil Search fell as much as 4.1 percent to A$7.58 in Sydney trading Wednesday after a 17 percent gain Tuesday. Woodside climbed 1.2 percent to A$30.
The government will want to ensure that the nation’s gas resources are developed in a “timely and efficient” way to boost the economy, Nik Burns, a Melbourne-based analyst at UBS Group AG, said by phone. “It’s an issue of commitment to the country,” he said.
An external PR agency working for IPIC didn’t respond immediately when asked for comment. PNG’s petroleum and energy ministry and the prime minister’s office didn’t immediately respond to an e-mail seeking comment after phone calls failed to get through.
Global Gas
Abu Dhabi’s IPIC affirmed its interest in Oil Search last year when it converted A$1.68 billion of exchangeable bonds in the company into its equity stake.
The Asia-Pacific region will account for 29 percent of total worldwide gas demand in 2040, according to Exxon. PNG’s GDP was $16 billion in 2014, compared with the UAE’s $400 billion, according to the CIA World Fact Book.
If successful, Woodside’s offer for Oil Search would be the biggest takeover of an energy company in Asia Pacific, surpassing BP Plc’s $7.2 billion acquisition of stakes in Indian oil and gas blocks from Reliance Industries Ltd. in 2011, data compiled by Bloomberg show. Including debt, it would be the second biggest after the reorganization of South Korea’s SK Group this year.