Tuesday, 21 August 2012

Shell ups stake in Australia's Browse LNG, Chevron exits

Tue Aug 21, 2012 12:39am EDT

 A Shell logo is seen at a petrol station in Ankara March 6, 2012. REUTERS/Umit Bektas

(Reuters) - Royal Dutch Shell Plc (RDSa.L) will increase its stake in Australia's Browse LNG project by picking up Chevron's equity in the $30-billion venture in an asset-swap deal, opening up the possibility of new development options such as floating LNG.

Browse LNG has been plagued by controversy over its proposed location at James Price Point on the northwestern coast of Australia, which has been opposed by some project partners, environmentalists and Aboriginal landowners.

"Shell's increased participation may promote alternative development options such as floating LNG, should a land-based project prove to be too expensive or too impractical," Morgan Stanley analyst Stuart Baker said in a note to clients.
Shell is regarded as the industry leader in developing floating LNG and expects to bring the world's first floating LNG, Prelude LNG, online by 2017.

Shell will pay $450 million and swap interests in two fields off the Australian coast for Chevron Corp's (CVX.N) holdings in the Browse LNG project, Shell said in a statement on Monday.

The deal will increase Shell's share in the development to around 27 percent, according to analysts, and make it the second largest shareholder after operator Woodside Petroleum (WPL.AX).

But the exit of Chevron, which is a partner in Woodside's North West Shelf LNG, may also decrease the likelihood of Browse LNG piping its gas to that facility as an alternative to the development of a plant at the James Price Point location, analysts said.

Woodside is scheduled to make a decision on whether to go forward with the James Price Point location by mid-2013.
BP (BP.L), Japan's Mitsui & Co (8031.T) and Mitsubishi Corp (8058.T) (MIMI) and BHP Billiton (BHP.AX) (BLT.L) also hold equity interests in the development.

Australia, which is expected to surpass Qatar as the top LNG exporter by the end of the decade, has more than $170 billion worth of LNG export projects under construction.

As part of the deal, Shell will exchange a one-third interest in the Clio and Acme fields in the Carnarvon Basin off northwest Australia for a 16.7 percent interest held by Chevron in the East Browse block and a 20 percent interest it holds in the West Browse block.

The swap would help Chevron expand its Wheatstone area resource base in Western Australia.

Chevron plans to increase production at the $29 billion Wheatstone plant to 25 million tonnes per year (mtpa) from the 8.9 mtpa of LNG currently under construction. Wheatstone LNG is expected to start exporting gas in 2016.

Buying Chevron's interests in the Browse LNG project in Western Australia means Shell will hold a 35 percent interest in the West Browse block and 25 percent interest in the East Browse block. The asset exchange is subject to governmental approval.

(Reporting by Swetha Gopinath in Bangalore and Rebekah Kebede in Perth; Editing by Sriraj Kalluvila and Himani Sarkar)

Barclays, Absa in talks to join forces in Africa

 Tue Aug 21, 2012 1:55pm GMT
 A logo of Barclays bank is seen outside a branch in Altrincham, northern England April 26, 2012. REUTERS/Phil Noble

British bank Barclays is in talks about combining its African operations with those of majority-owned subsidiary Absa Group in a move aimed at accelerating expansion on the continent to catch up with rivals.

Barclays acquired a majority stake in South Africa's third-largest bank in 2005 but the two have remained separate entities outside South Africa - in one case, Tanzania, running parallel operations in the same country.

The bank said on Tuesday that combining the businesses would help increase growth opportunities in Africa.

"The Africa business is an important long-term growth driver," said Oriel Securities analyst Mike Trippitt who estimates Barclays' African loan book will grow by an average 9 percent per annum between 2011 and 2015 compared with 5 percent for the group.

Analysts have said Absa, which is 56 percent owned by Barclays, has been slow to take advantage of its parent's wide presence on the continent, trailing fast-moving rival Standard Bank.

Absa's shares have been hammered on concerns that rising bad debts were derailing its recovery. The bank posted a surprise drop in first-half earnings last month.

The shares are down nearly 7 percent over the last six months, making it the worst-performing stock among South Africa's four biggest banks. By contrast, rival FirstRand is up nearly 20 percent over the same period.

Absa shelved plans to buy Barclays' African assets in 2008 citing price differences. The planned purchase had been part of the original deal when Barclays acquired its Absa stake.

The latest proposal would see Barclays combining its interests in Botswana, Ghana, Kenya, Tanzania, Uganda, Zambia and the Indian Ocean with Absa, and remaining as the majority shareholder of the combined African operations.

Barclays and Absa had already agreed to work more closely together in their "One Africa" strategy and had set up a joint team of executives.
The proposed combination of the businesses will mirror the operational structure already in place, said Maria Ramos, chief executive of Absa and Barclays Africa.

"It will provide a platform for further growth," she said.
The two lenders are hoping to grow their retail and corporate franchise across the continent, while growing the investment bank. They have launched financial services in Botswana, Mozambique and Zambia, and are planning to roll out similar products in Kenya.
"It will result in cost savings," said Faizal Moolla, an analyst at Avior Research. "It could mean that Absa will be focused on South Africa and the new combined entity will spearhead the drive into Africa."
Barclays said combining the businesses would not result in job cuts.
Shares in Barclays were up 1.8 percent to 194.3 pence at 1323 GMT, compared with a 0.7 percent rise in Europe's bank index. Absa was down 0.1 percent compared with a 1 percent increase in the Top-40 index.

(SOURCE- Thomson Reuters, 2012)