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Shell to sell NZ energy assets


By  and : 31 May 2017

Australian oil and gas companies that end up missing out on Origin Energy’s Lattice Energy portfolio may soon turn their attention across the Tasman, where energy giant Shell has kicked off a sales process for its New Zealand business that could be worth as much as $1 billion.

Investment bank JPMorgan has been working on a sale for the global oil company for some time, but flyer documents were finally released to prospective suitors this month.

Private equity firms could be in line to buy the oil projects in the Taranaki Basin off the west coast of the North Island, along with Alinta’s Hong Kong owner Chow Tai Fook, not to mention a string of New Zealand names and listed Australian companies eager to expand.

The flyer obtained by DataRoom says Shell aims to sell part of its interest in New Zealand, including a 48 per cent stake of its Pohokkura field, an 83.75 per cent stake in its Maui field, all of Shell Todd Oil Services and various interests in associated tank farm and infrastructure assets.

Shell counts New Zealand’s Todd Energy as its joint venture partner. It recently bought the global company out of the Kapuni field that the pair jointly owned.

But the Todd family’s companies are currently more focused on concentrating capital in Western Australia, where its iron ore project is under construction, and apparently a deal was cut where Todd was allowed to buy the cheapest asset in Shell’s oil and gas portfolio in exchange for waiving its first right of refusal on the rest of the assets.

The sale by Shell comes after a review of operations in December 2015 as part of efforts to refocus its natural gas and deepwater oil businesses following a slump in oil prices.

It also follows its $US50bn takeover of BG Group, which sparked a $US30bn global sell-down and a retreat from various markets.

Shell has operated in New Zealand for about 100 years, and its businesses account for about half of New Zealand’s natural gas production and a large chunk of light oil output.

A major point of focus in the sale will be any rehabilitation costs associated with the assets.

Overall, the assets account for 28 per cent of New Zealand’s remaining proved plus probable gas reserves and 31 per cent of the country’s total gas production for 2016.

The gas within the portfolio is largely contracted under take-or-pay contracts with investment-grade companies.

JPMorgan’s flyer is promoting the offering at a time that demand for gas is expected to outstrip supply in New Zealand, starting this year.

It is understood that the hold-up is in connection to ongoing discussions with its local partner Todd Energy, which eventually waived its first right of refusal.

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