Shell bid in GLNG not guaranteed

THE consolidation that wasn't a consolidation but now could be a consolidation is still not confirmed as a consolidation.

Confused? Join the club.

The liquefied natural gas (LNG) industry has always remained tight lipped about the consolidation of LNG plants on Curtis Island but last week that changed with Royal Dutch/Shell bidding for a strategic stake in the Santos-led Gladstone Liquefied Natural Gas project (GLNG).

In May, The Observer reported the head of Shell Australia, Ann Pickard, believed consolidation made sense, with Minister for Resources and Energy Martin Ferguson agreeing.

For some time now rumours have been circulating in the industry that the four LNG projects earmarked for Curtis Island will consolidate into two.

Shell is competing with Korea Gas and Sinopec to purchase a stake of between 9 per cent and 20 per cent in GLNG that could be worth as much as $1 billion.

However, a deal with Shell is expected to lead to a merger of GLNG and the rival Arrow coal seam gas-to-LNG project, which is being acquired for $3.5bn by a Shell/PetroChina joint venture.

Reports indicate that Shell is believed to have approached Santos after the Adelaide-based group publicly stated its desire to sell down at least 9 per cent in GLNG

Shell and Santos told The Observer yesterday that they would not speculate on the proposed consolidation, however, Ian Grey, from Santos, said Santos remained in detailed ongoing discussions with a number of parties in relation to potential LNG sales, equity in the project and collaboration between projects.

“These discussions are incomplete and there is no certainty that definitive agreements will be executed by the parties,” he said.

The consolidation has raised local concerns regarding the prediction of a 10,000 workforce during construction and 2000 during production for both projects would now be cut in half.

Project manager John Smits, from the Gladstone Engineering Alliance (GEA), who has organised tender readiness programs for the LNG industry, said this was all part of the final investment decision.

“If there is an amalgamation of combined LNG projects that makes the project a certainty. We would be all for it,” Mr Smits said.

Santos shares rose $1.24, or 9.72 per cent, to close the week at $14 after the announcement.

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