Multinational oil and gas companies have negotiated major international deals recently, including a transaction that marks Statoil ASA's entry into Algeria.
Statoil ASA agreed to buy 49% of BP PLC's interest in the In Salah natural gas fields and 50% of BP's interest in the In Amenas gas development project, both in Algeria, for $740 million total.
In addition, Statoil and BP agreed to work with Algerian state oil and gas company Sonatrach to jointly operate the two projects, aimed at delivering gas to the European markets.
In other upstream news:
• BP PLC and the Alfa Group and Access-Renova (AAR) have signed a sale and purchase agreement, moving them closer to finalizing the completion of combining their Russian businesses into a new joint venture, TNK-BP. BP will pay less than expected.
• Cairn Energy offered to sell 85% of its stake in two oil and gas blocks in the Krishna-Godavari (KG) basin to India's state-owned Oil & Natural Gas Corp. (ONGC) for $100 million and 15% equity in two ONGC blocks.
• Unocal Corp.'s unit Unocal North Sumatra Geothermal Ltd. (UNSG) agreed to sell its rights and interest in the Sarulla geothermal project of Northwest Sumatra to PLN, the state-owned electric company, for $60 million.
• ChevronTexaco Corp.'s European upstream business unit has offered to sell its equity in three North Sea fields—Galley, Orwell, and Statfjord. The company's net share of production from the properties totals 21,500 boe/d. The divestiture stems from an effort to improve the unit's operating efficiency and strengthen its portfolio, a spokesman said.
Meanwhile, in pipeline news, Plains All American Pipeline LP, Houston, announced it has acquired interest in three pipelines and an LPG storage asset for a total of $29 million.
Statoil enters Algeria
Upon closing, Statoil will have a 31.85% interest in the In Salah revenue sharing contract and a 50% interest in the In Amenas production sharing contract. Statoil and BP will have equal representation on all project management committees and boards.
"This transaction gives Statoil an excellent position working with BP and Sonatrach in a major gas province with significant growth potential," said Statoil CEO Olav Fjell. "This is an important step towards fulfilling our international growth and gas strategy, and the transaction supports our key performance targets in 2007."
The two projects' gross reserves are estimated to be 2.275 billion boe. In Salah reserves are 170 billion cu m of gas (1 billion boe). In Amenas reserves are 140 billion cu m of gas (880 million boe) and 325 million bbl of liquids.
Production from In Salah is expected to start in mid-2004 and from In Amenas in late 2005 (OGJ Online, Oct. 31, 2002).
The European Commission must approve In Salah's change of control (OGJ Online, Aug. 13, 2001). The Algerian Ministry of Energy and Mines also must approve the transaction. In addition, Sonatrach has preemption rights over the partial assignment of BP's interests in both assets.
TNK-BP nears finalization
BP will have a 50% stake as will its Russian partners (OGJ, Feb. 17, 2003, p. 35). The new company will incorporate Tyumen Oil Co. (TNK) and Sidanco Oil Co. In addition, BP announced that its investment will total $6.15 billion instead of the $6.75 billion originally anticipated.
"On the basis of the progress made to date, I believe we can complete the transaction over the summer," said BP Chief Executive John Browne said. More than 70 members of the management team for the JV already have been appointed.
Closing adjustments reflect increased debt levels in TNK-BP, partly due to TNK's financing of the Slavneft acquisition (OGJ, Jan. 6, 2003, p. 31). BP now expects to pay $2.4 billion in cash for its equity interest in TNK-BP instead of $3 billion.
As announced in February, the deal still includes three subsequent payments of $1.25 billion/year in BP shares, valued at market prices before each annual payment.
Discussions continue between BP and AAR on whether the interest, which TNK has taken in the Russian company Slavneft, should be included in TNK-BP. Any such inclusion will result in additional consideration being paid to AAR.
The transaction, retroactive to Jan. 1, awaits approvals from regulatory authorities at the European Union, in Ukraine, and in Russia.
Cairn-ONGC offer
If the deal is accepted, Cairn Energy would sell 85% of its holding in blocks KG-DWN-98/2 and KG-OS/6 in exchange for 15% equity in two blocks that ONGC won under the third round of the New Exploration Licensing Policy.
As of OGJ presstime, a response was pending from ONGC.
Previously, ONGC bid $200 million for three of Cairn's blocks—two in the KG basin and the CB-OS/2 block in the Cambay basin in Gujarat.
Cairn rejected that bid and has since withdrawn the CB-OS/2 block from its offer of sale.
Unocal selling geothermal interest
Under the heads of agreement, PLN would acquire Unocal North Sumatra's interest in a Joint Operation Contract with Pertamina and an Energy Sales Contract with PLN (OGJ, Mar. 8, 1993, p. 20).
The transaction is expected to close in September 2003. Unocal expects to record a gain on the transaction in the third quarter.
On the Sarulla project, UNSG has conducted extensive exploration activities, including drilling 13 wells in three separate prospects. In 1995, the first commercial geothermal resources were discovered in Silangkitang.
In 1998, the project was temporarily postponed through a presidential decree because of Indonesia's economic crisis at the time. The presidential decree was later revoked.
Unocal negotiated with PLN for a long-term contract, but Unocal's legal, technical, and commercial requirements to invest more in the project could not be satisfied, the company said.
PLN's proposal to purchase the contracts from UNSG became a preferred option for settling the contract issues, Unocal said.
Plains' acquires interest in three systems
Plains secured an 8.8% interest in the Mesa pipeline system in the West Texas Permian basin from Unocal, giving the partnership a net carrying capacity of 28,000 b/d of crude on that system, which extends from Midland to Colorado City, Tex.
Mesa is operated by an affiliate of ChevronTexaco Inc.
Plains also acquired from Marathon Ashland Pipe Line LLC, a 95 mile, 16-in. diameter, crude oil mainline that delivers 38,000 b/d of oil from Iraan station in Pecos County, Tex., to Midland, where it can deliver crude to the Basin and Mesa pipeline systems.
In addition, Plains acquired the underground Alto storage facility in Alto, Mich., from Ohio-Northwest Development Inc. The Alto facility, 20 miles southeast of Grand Rapids, can store more than 38 million gal of LPG. The facility will support the expansion of Plains' LPG business in Canada and the northern tier of the US, the company said.
