Tuesday, December 04, 2012

Shale Gas Boom Attracts Record Asian Takeovers

The booming shale natural gas industry has lured Asian companies to make record takeovers, now at par with the US.
From Bloomberg
Woodside Petroleum Ltd. (WPL)’s purchase of a stake in Israel’s largest natural gas deposit takes Asia- Pacific oil and gas acquisitions to a record $99 billion this year, tying the U.S. for the first time.

Australia’s second-largest petroleum producer yesterday said it will pay partners including Noble Energy Inc. (NBL) an initial $696 million and as much as $2.3 billion for part of the Leviathan field. Deals by U.S. energy companies have fallen 35 percent to $98.7 billion in 2012, while Asia-Pacific purchases increased 3.8 percent, according to data compiled by Bloomberg.

The Leviathan deal underlines the growing appetite for oil and gas assets among Asia-Pacific companies after energy demand in the region grew at more than double the world average of 2.5 percent in 2011. China Petroleum & Chemical Corp. (600028), Cnooc Ltd. (883) and India’s Oil & Natural Gas Corp. (ONGC) have secured supplies abroad as new fields are found from North America to Africa.

“There are so many more options for Asian companies now with new discoveries around the world,” said Laban Yu, head of Asian oil and gas equity research at Jefferies Hong Kong Ltd. “The trend will be led by China, which has a large foreign- exchange reserve and is seeking hard assets.”…

A surge in oil and gas production from shale rocks in the U.S. and Canada is prompting operators to rope in partners to meet capital expenditure. Canada, home to the world’s third- biggest oil reserves, will require almost C$650 billion ($655 billion) of investments to develop the nation’s biggest resource projects over the next decade, according to Natural Resources Minister Joe Oliver.

“Higher production in North America means large amounts of capital and operators have no option but to sell some of their assets,” said Sonia Song, a Hong Kong-based analyst at Nomura Holdings Inc. “Buyers from Asia are stepping in.”
Some insights from the above.

The Shale gas boom has been attracting global capital and investments. The Shale boom is not only going global, it has been a deepening trend.

This will likely spillover to the reconfiguration of energy usage. For instance, parts of the transportation industry will likely shift to natural gas fuel.

In the Philippines, about 15,000 taxicabs have been running on LPG fuel converted engines.

Eventually major car companies will likely mass produce OEM (Original Equipment Manufactured) LPG fueled engines or Autogas units. So far, 16 million out of the 600 million passenger cars world wide are fueled by autogas, which has been popular Turkey South Korea, Poland, Italy and Australia.

Asian capital has been taking advantage of such opportunities by filling in the capital-investment gap where the boom has been initially taking place: US and Canada.

Asia’s record takeover could be seen as more signs of wealth convergence.

Also, Asian investments can be construed as opportunities to acquire and assimilate the new technologies underpinning the Shale gas boom which could be applied domestically.

As for the diversification of foreign exchange reserves into hard assets, technically speaking these Shale-natural gas investments have not been made by the People’s Bank of China. So it is unlikely that diversification of foreign exchange has been the priority.

Chinese state owned firm’s investments in the booming energy sector are mostly done out of political and economic interests—meant to expand energy reserves in order to meet increasing demand and or to secure energy supplies to maintain politically stability.

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