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Many Asian companies have invested in North American shale gas in an attempt to gain both hands on experience in the fracking industry in order to develop shale gas plays in their home countries, and also to secure supplies of cheap natural gas.
Petronas, the Malaysian state owned oil company, is the first to actually launch a bid to buy out its North American joint venture partner. If their $4.7 billion dollar takeover bid for Progress Energy Resources Corp. is accepted it will give them control of huge shale gas reserves in British Columbia’s Montney tight gas region, and Alberta’s Deep Basin, which it can then ship across to the lucrative Asian markets.
Petronas have offered C$20.45 a share, a generous 77 percent premium on the stock's Wednesday closing price. The offer caused an increase in share prices of other Canadian producers with shale gas assets, as investors hoped that more takeover bids would be submitted by other Asian firms.
Brook Papau, an analyst at ITG Investment Research in Calgary, commented that it was “a rich deal when you just look at the premium paid, but I think Progress was generally undervalued in the market to begin with.”
Michael Culbert, CEO of Progress, said that Petronas will offer the financial muscle to drive new developments forward, which, due to the weak state of North American gas markets, Progress would be unable to achieve alone.
To coincide with the takeover, and help transport natural gas to Asia, where it can fetch a much higher price than in North America, Petronas plans to build a LNG plant at Prince Rupert, British Columbia, on Canada’s West Coast. The plant, which will start operating in 2018, will have a processing capacity of 1.2 billion cubic feet of natural gas a day and be directly supplied, via new pipelines, from gas fields in Northeast British Columbia.
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com