A global energy heavyweight's pledge to soon spend $5 billion or more scooping up Canadian natural-gas assets has piqued curiosity in the oil patch, but isn't raising eyebrows in an increasingly crowded West Coast liquefied natural gas space that's expected to grow.
A report Monday by Bloomberg that Malaysian state-owned oil company Petronas is looking to close a multibillion-dollar acquisition within three months, to secure supply for export to Asia, was met with predictions of more to come.
The news "comes as no surprise," said David Potter, vice-chairman and deputy head at Scotia Waterous, the oil and gas mergers and acquisitions arm of Scotiabank.
Potter, who returned from Asia on the weekend, said he expects strong interest from state oil companies and other Asian energy firms to accelerate in 2012.
"We will see more transactions announced in Canada, not only by those such as Petronas who are al-ready here, but by new entrants as well," Potter said, noting cheap North American natural gas is attractive for international firms with a long-term view.
Petroliam Nasional Bhd., known as Petronas, wants to grow its foot-print in Canada, Bloomberg reported, citing a Friday interview with the firm's chief executive, Shamsul Azhar Abbas.
"This is going to be big," Abbas reportedly said from the company's twin tower headquarters in Kuala Lumpur. "There are quite a few candidates out there, who are willing to talk."
Shares of Calgary-based Progress Energy Resources Corp., a partner with Petronas in British Columbia since last June, rose as much as 13 per cent Monday following the Bloomberg report.
The stock was fuelled by take-over speculation, said Eric Nuttall, portfolio manager at Sprott Asset Management.
"For Petronas, Progress is the most logical acquisition target, if they truly are looking at a West Coast LNG solution," Nuttall said.
Petronas, known as a large, integrated global LNG supplier, has a $1.07-billion joint venture with Progress to develop three of the firm's Montney shale gas properties in northeastern British Columbia and a potential gas liquefaction and export facility in either Kitimat or Prince Rupert, B.C. As 80 per cent owner of the downstream LNG component, Petronas would operate a future facility amounting to one billion cubic feet per day, which the companies plan to decide on by the end of 2014.
Progress shares tempered some-what after it issued a statement at the request of the Toronto Stock Exchange, indicating the company is not in talks with Petronas outside of the joint venture, and closed up 79 cents at $10.79.
Progress chief executive Michael Culbert said there is "a lot of discussion" about LNG between oilpatch players and Asian energy companies. "I think if you look at it from the shale gas supply side, the answer is a lot of projects can be supported."
It's painted as a perfect fit: Asia's growing economies require fuel and abundant North American natural gas, especially in Canada, is dirt cheap.
The amount of recoverable gas trapped in B.C.'s tight shale formations is expected to be huge.
"There are supposed to be hundreds of tcf (trillion cubic feet) of unconventional resources over there which cannot all be consumed in Canada and the U.S. so they have to be exported out to be commercialized," said Asish Mohanty, senior research analyst of global LNG at consultancy Wood Mackenzie, who noted Canadian projects compete with cheaper brownfield U.S. Gulf Coast proposals.
Wood Mackenzie said in a report last week that Asian LNG demand could grow another 10.2 billion cubic feet per day by 2022, the equivalent of just over 10 facilities the size Petronas and Progress are assessing.
There's also the spectre for gas prices north of the border now selling below $2 per gigajoule - decade lows - to fall lower, since storage facilities are 83 per cent full, the same as last September, even as summer-time injections of gas underground haven't started, Nuttall noted.
Nuttall said Petronas could be eyeing several Canadian firms for takeovers or asset acquisitions, including Encana Corp. or a junior firm developing B.C. shale gas, such as Calgary's Painted Pony Petroleum Ltd.
Encana, Canada's top gas producer, said Monday it is seeking partnerships to develop its oil and natural gas liquids plays on about 637,400 hectares in the United States and Canada, including the Alberta Duver-nay play. An Encana spokeswoman said its news was not linked to the acquisition comments of the Petro-nas CEO and would not comment on speculation.
Other Asian energy companies are backing proposals for coastal B.C. LNG terminals, include PetroChina Co. Ltd. and parent company China National Petroleum Corp., Korea Gas Corp. and Mitsubishi Corp.
Mitsubishi has the largest commitment, with its February pledge to buy a $2.9-billion stake in Encana's northeastern B.C. Cutbank Ridge.'
Encana, EOG Resources Inc. and Apache Corp., the operator, have proposed a $4.7-billion facility for Kitimat, B.C.
rpenty@calgaryherald.com