The acquisition positions PETRONAS as one of the leading investors in the North African gas business and paves the entry of PETRONAS into the Atlantic Basin Liquefied Natural Gas (LNG) market. Coupled with its already strong position in the LNG market of North Asia, the acquisition effectively transforms PETRONAS into one of the leading players in the global LNG industry.
The upstream assets in the WDDM concession include 13.6 trillion cubic feet (TCF) of 2P gas reserves in nine discovered fields, giving PETRONAS 6.8 TCF of net 2P reserves with its 50% acquisition in the WDDM concession. Gas produced from the WDDM concession is being supplied to Egypt’s fast growing domestic market and the ELNG project. The remaining 50% working interest and joint operatorship of the WDDM concession is held by British Gas Group (BG Group). BG Group together with Edison was awarded the concession by the Egyptian Government in 1995.
The ELNG project comprises the development and operation of LNG liquefaction plant and related infrastructure at Idku, approximately 50 km east of Alexandria in Egypt. Construction of ELNG project’s Train 1 with a 3.6 million tonnes per annum capacity is under way and first production is expected in 2006. The entire output of Train 1 has been contracted to Gaz de France under a 20-year take-or-pay contract.
Initial work on the second train, which will double the output from the ELNG project, has started. Marketing of Train 2 output has reached an advanced stage with potential buyers from Europe and the United States having expressed strong interest in purchasing Train 2 output. The ELNG plant is being designed to accommodate up to six trains, reflecting the substantial upstream resource and future potential for LNG sales into the Atlantic Basin.
Production from the WDDM concession has started recently, initially supplying gas to the fast growing domestic market which has been expanding at an average of 15% per annum over the last five years. Production from the WDDM concession will increase to about 1,200 million standard cubic feet per day (mmscfd) when the first LNG train starts up in 2006 and will rise further to about 1,780 mmscfd as the second train is brought onstream. Extensive additional exploration potential is recognised in the WDDM concession, offering scope to build on the 100% exploration and appraisal success track record from the 16 wells drilled to date.
PETRONAS views the acquisition as an attractive opportunity for investment and value creation. With significant upstream potential, strong domestic gas market and access into Southern European and Eastern Seaboard US LNG markets, the world class integrated project provides a high quality foundation for PETRONAS to further develop its gas business in North Africa and the Middle East.
The acquisition is conditional on the approval of the Egyptian Government and is expected to close during the second quarter of 2003.
The agreement for the acquisition was signed in Cairo today and PETRONAS was represented by its President and CEO, Tan Sri Dato’ Mohd Hassan Marican. Citigroup is acting as Financial Advisor to PETRONAS for the transaction while Lambert Energy is acting as PETRONAS’ Strategic Advisor.
PETRONAS’ existing position in North African gas business includes a 16% stake in Egypt’s North East Mediterranean Deep Water (NEMED) block. NEMED is located approximately 100km north-west of WDDM, providing the possibility and opportunity to integrate gas production from NEMED into the WDDM project. PETRONAS is also involved in the development of the Ahnet gas project in Algeria in partnership with Gaz de France. PETRONAS has a 64% interest in Ahnet project with Gaz de France the remaining 36%.
As for the LNG business, the PETRONAS LNG Complex in Bintulu, Sarawak is set to become the single largest LNG production facility in the world with a combined capacity of 23 million metric tonnes per annum by October 2003. Of this, PETRONAS’ net production capacity is 16.5 million metric tonnes, making it the largest LNG producer in the world.
Through subsidiary Malaysia International Shipping Corporation Berhad, PETRONAS is the world’s largest owner and operator of LNG fleet with 15 tankers currently in operation, providing PETRONAS with the capability and flexibility to provide reliable transportation of LNG. Six more tankers are under construction, further enhancing PETRONAS’ position in the LNG transportation business.
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