Australian natural gas producer Arrow Energy Ltd. announced that it has accepted a new, improved joint takeover bid from energy majors Royal Dutch Shell Plc. (RDS.A) and PetroChina Co. Ltd. (PTR). The offer now requires approval from Arrow shareholders and the Australian regulators.
The revised proposal, worth about A$3.44 billion ($3.14 billion), came from a company jointly owned by Royal Dutch Shell and PetroChina. As per the bid, Arrow shareholders would get A$4.70 per share in cash (up from A$4.45 offered before) plus one share in a new listed entity, Dart Energy Ltd., which would comprise Arrow’s Asian exploration assets (including interests in China, India, Vietnam and Indonesia), as well as some Australian assets.
Brisbane-based Arrow Energy is focused on the development of coal seam gas (a form of natural gas extracted from coal beds) throughout eastern Australia and Asia. The company claims to have the largest coal seam gas reserves in the Australian state of Queensland.
In recent times, Australia’s significant volume of coal bed gas has raised interest with a number of international companies, as its value as an alternative energy source has ballooned. Energy firms have already invested about A$20 billion in Australia’s booming coal seam gas sector as they aim to convert the abundant gas resource into liquefied natural gas (LNG) for export to Asia.
Coal seam gas is largely methane gas trapped in the molecular structure of coal seams as against conventional natural gas, which is stored in the gaps between rock formations. As a result, coal seams are able to contain several times more gas than found in traditional gas reservoirs.
The takeover bid, if successful, will boost Anglo-Dutch supermajor Shell’s position in the natural gas sector two years after it purchased 30% of Arrow’s coal bed gas assets. It will also help Shell’s plans to build a large LNG plant at Gladstone, Queensland, thereby providing the group massive potential gas reserves across the state.
For PetroChina, China’s biggest oil and gas producer, a successful deal would aim at converting the abundant gas resource into higher-value LNG and exporting it to customers in the Chinese market.
In the process, both the bidders would get a foothold in Australia’s burgeoning coal seam gas industry, which looks set to become a big exporter for the country.
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