Shell may sell remaining stake in Woodside for $7.4 bn: report

03 Jan 2014

Anglo-Dutch oil and gas giant Royal Dutch Shell Plc is likely to sell its remaining 23.1-per cent stake in Australian oil and gas major Woodside Petroleum Ltd for approximately $7.4 billion, The Australian reported today citing some sources.

It has been speculated that the company's new chief executive Ben van Beurden who took over from Peter Voser yesterday, may make a move within weeks. Beurden may unveil his divestment plans in the coming annual results briefing on 30 January, according to sources.

Potential buyers of the stake could include the sovereign wealth funds of the Middle East.

In 2010, Shell sold a 10-per cent stake in the Australian company for $3.3-billion (See: Royal Dutch Shell sells 10-per cent stake in Australia's Woodside for $3.3 billion) 

Earlier in 2001, Shell made an unsuccessful attempt to acquire Woodside, which was turned down by Australian rgulators on national interest grounds.

PPerth-based Woodside is the country's largest independent oil and gas company and the operator of Australia's North West Shelf project, which makes up about 40 per cent of the country's total gas and oil production. It is a public company listed on the Australian Securities Exchange (ASX).

Woodside is the major equity holder and operator of $45-billion Browse Liquefied Natural Gas (LNG) project, 425 km north of Kimberley coast containing large reserves of about 15.5 trillion cubic feet of gas and 417 million barrels of condensate. Woodside's other partners in the project include Royal Dutch Shell, BP, Japan Australia LNG and PetroChina.

In June, PetroChina had bought mining giant BHP Billiton's $1.6 billion stake in Browse project.

Last year Shell and Woodside worked together to ensure that Shell's revolutionary floating LNG technology would be used in the Browse project, as the earlier proposed onshore development became unviable due to high costs.

Meanwhile, Woodside Petroleum announced today that it has ended its sales and purchase agreement contract with Japan Australia LNG for 1.5 million tonnes per annum of LNG from the Browse project, which was conditional upon a final investment decision on the Browse being taken on 31 December.

''As a result of the Browse joint venture participants deciding not to proceed with an onshore development and to enter 'basis of design' for a floating LNG development concept, both parties recognise that this condition will not be satisfied,'' Woodside said in an a filing to the ASX.

However, the two companies agreed to continue working together to market co-mingled LNG to the Asian market, primarily to Japanese customers.

Shell is under pressure from investors to sell non-core assets to focus on more profitable ventures and improve the company's financials.

Shell reported a 32-per cent slump in its third quarter earnings due to weak refining margins, higher production costs and operational problems in Nigeria.

Shell could exit Woodside via a combination of strategic sales, market placements and probably a share buyback by Woodside, the paper said.

Shell and Woodside declined to comment on the matter.

Shell's 2010 stake-sale fetched A$42.23 a share and a near-term sell off could be at a discount as Woodside is currently traded about 9 per cent lower than that price, closing today at A$38.56 a share.

Separately, Shell said today that it has completed the acquisition of Spanish oil giant Repsol SA's LNG portfolio outside North America for $3.8 billion, a deal that was agreed earlier in February.