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Key Company Update

By Neil Ritchie

Time is ticking for parties interested in bidding for all or some of Shell New Zealand’s offshore production and exploration assets and infrastructure assets, with bids for the Kiwi arm of global Royal Dutch Shell rumoured to be closing at the end of November.

 The Australian Business Review has recently reported that Sydney private equity firm Questus Energy may be looking at bidding for some or most of Shell New Zealand’s remaining assets after it missed out on buying Origin Energy subsidiary Lattice Energy, which includes Origin’s stake in and operatorship of the offshore Taranaki Kupe gas-condensate field.

Questus lost out to fellow Aussie company Beach Energy, which is paying $A1.58 billion for the Lattice business. However, it is understood that should Beach have missed out on Lattice, it would then have turned its attention to Shell New Zealand’s portfolio.

Questus joins a now long list of energy companies believed to be interested in bidding for Shell’s remaining New Zealand assets. This now excludes Shell’s former half stake in the onshore Taranaki Kapuni gas-condensate field, which Shell sold to Todd Energy earlier this year for an undisclosed sum. As part of this agreement, Shell acquired Todd’s 50 percent shareholding in Maui operator Shell Todd Oil Services (STOS) and renamed it Shell Taranaki Limited (STL).

The many companies believed to be interested in Shell include Canadian listed Jadestone Energy, large listed multinational corporations such as fellow Canadian Vermilion Energy and Austrian giant OMV, Aussie listed Woodside Energy and even private Kiwi company Greymouth Petroleum, in conjunction with global investment company KKR.

Questus -- owned by London private equity firm Intermediate Capital Group – says its senior management team has a combined 135 years of experience in Australia and in various international roles. It also says it develops oil and gas fields and seeks to extract potential from underdeveloped resources. It further says it’s positioned at the “low risk” end of the upstream energy investment spectrum, avoiding further exploration.

As well, Questus says it seeks working interests in production assets; seeking sustainable operational improvements and production optimisation; the development of discovered but undeveloped resources; and, finally, the decommissioning and abandonment of oil & gas fields.

However, commentators say Questus is too small for Royal Dutch Shell to really be interested in, though, with the appropriate financial backing, Questus could still feature in any “bidding war”, as Greymouth Petroleum may do in conjunction with global investment company KKR.

Shell is aiming to sell its majority stake in the ageing Maui field, its majority stake in the near-shore Pohokura gas-condensate field, its remaining offshore exploration interests, STL, and its interests in the associated Omata and Paritutu tank farms and infrastructure assets.

The Maui partners are Shell with 83.75 per cent, OMV with 10 percent and Todd Energy with 6.25 per cent.

Commentators are understood to believe Todd may also be considering selling its small (6.25 percent) stake in Maui, thus avoiding any liability for decommissioning the field, which could cost up to $NZ2 billion or so, at the end of the field’s economic life in 2030 or so.

Questus and Tamarind Management, which early this year completed its buy-out of Aussie company AWE’s 57.5 percent stake in the Tui gas field and took over as operator, already have experience in the abandonment of offshore fields and may be more suited to decommissioning Maui than some other possible bidders.

The relatively young Pohokura field (it started commercial production in 2006) remains a very attractive asset for the partners – Shell (48 percent, Todd (26 percent) and OMV (26 percent) -- producing more than 40 percent of the country’s total gas production. Shell operates Pohokura.

Given Shell’s likely total exit from New Zealand, OMV and/or Todd could be interested in acquiring some or all of Shell’s Pohokura stake. However, commentators think it is more likely OMV will want to increase its stake in Pohokura than Todd.

The Royal Dutch Shell sale comes as part of its global sell down, signalling a retreat from various markets amid its $US30 billion global asset sale plan following its $US50 billion takeover of BG Group.