SINGAPORE: PetroChina may sell out from natural gas projects in Australia and oil sands in Canada to stem losses and divert funds to more lucrative sites in the Middle East, Africa and central Asia, two people with knowledge of the matter said.
PetroChina’s plan follows a similar strategic shift by smaller state peer CNOOC Ltd, which was preparing to exit its operations in Britain, Canada and the United States because of concerns the assets could become subject to Western sanctions.
The sales follow an internal review of PetroChina’s global portfolio that began last year, the two sources said, declining to be named as the discussions are not public.
Unlike CNOOC’s sales, PetroChina’s divestitures are driven more by the assets’ disappointing economics than any fear of US sanctions as it does not own any oil and gas assets in the United States, though political strains with Australia and Canada also played a part, they said.
The state oil and gas major hopes to sell some of these assets, which have incurred billions of dollars of losses and are in areas where the company cannot easily compete, in the next two years, the sources said.
“Australian gas assets - both Arrow Energy and Browse — are considered among the top ‘negative assets’ in PetroChina’s global portfolio. It’s also an area where CNPC has little competitive edge,” said one of the sources.
PetroChina bought Arrow Energy in 2010 for $2.5 billion via a joint-venture with Shell, in its first investment in Australia’s coal seam gas sector. It purchased BHP’s stake in Browse, Australia’s largest untapped gas resource, in 2013 for $1.63 billion.
The company is also looking to offload the wholly-owned MacKay River Oilsands and Dover Oilsands projects in Canada because of losses producing and processing the tar-like fuel into bitumen, the sources added.
China’s state energy companies were among the industry’s most acquisitive in the early 2010s, including CNOOC’s $15 billion takeover of Canada’s Nexen in 2013. But they became more subdued after the 2014/15 oil price collapse and as the government scrutinized their finances.
Economic factors have also likely caused PetroChina to question its buying spree.
Arrow is PetroChina’s largest loss-making overseas investment. Browse is technologically challenging and unlikely to start producing until 2030, if it even receives final approval.
Arrow only made a final investment decision to develop the 5-trillion-cubic-feet Surat Gas Project in Queensland in 2020. It was held back by a dispute between PetroChina and Shell over the pricing of gas to a Shell-operated export facility, Reuters has reported. Between 2018-2021, Arrow reported around A$3.3 billion ($2.29 billion) in losses, including A$2.2 billion in impairments.