Progress Energy Canada, a subsidiary of Malaysia’s national energy company Petronas, has purchased a chunk of Talisman Energy Corp’s (TSX:TLM) Montney region assets for $1.5 billion, the company announced November 8.
The acquisition includes 127,000 net acres of land, wells, pipelines and processing plants in the Greater Farrell and Great Cypress areas, both in northeastern British Columbia. The transaction represents the sale of approximately 75% of Talisman’s Montney position.
In the Greater Farrell area, Progress will be acquiring Talisman’s 50% interest where Talisman’s partner, Sasol Limited, a South African gas-to-liquids company, owns the remaining 50%.
In the Greater Cypress area, Progress Energy will acquire Talisman’s partnership interest where it already has joint operations with Talisman and other operators, although it will be the operator and have the largest interest.
The assets are a combination of liquids-rich and dry gas reserves.
Progress anticipates the sale will close in the first quarter of 2014, pending Industry Canada approval.
According to a press release from Progress Energy, natural gas production in the acquired lands will total approximately 11,000 barrels of oil equivalent per day, as of October 1, 2013. Production is expected to increase in the fourth quarter.
“These natural gas interests are an attractive complement to our existing north Montney asset base in northeastern British Columbia and are among the largest remaining north Montney lands not dedicated to a potential liquefied natural gas (LNG) project,” said Michael Culbert, Progress Energy president and chief executive officer.
“The location, resource potential and operational synergies of these assets make this an ideal fit that expands our British Columbia resource base and increases our land position to 1.2 million acres.”
News of the sale comes on the heels of a National Energy Board report, released November 6, which found the natural gas reserves in the Montney region to be among the largest in the world.
For more on the report, click here.
Progress Energy’s parent company Petronas owns 90% of Pacific NorthWest LNG, an $11 billion liquefied natural gas (LNG) export facility proposed for Lelu Island in Prince Rupert, B.C.
Last month, Petronas pledged up to $36 billion over the next 30 years to the Pacific Northwest LNG project.
Of the $36 billion, $11 billion is slated for the export facility, $5 billion is earmarked for a pipeline and $5 billion has already been spent on Petronas’ takeover of Progress Energy last year. The remainder of the money will be spent on acquiring assets such as natural gas wells in northeast B.C.
For more on Petronas’ Pacific NorthWest LNG project, click here.
Petronas’ announcement was not a final investment decision on the project. A final investment decision is expected next year.
Phil Skolnick, New York-based managing director and senior oil and gas analyst with Canaccord Genuity, told Business in Vancouver that the Montney deal “is all about LNG” but said crucial final investment decisions from companies such as Petronas don’t depend on purchasing natural gas reserves. What’s needed are the details of the oft-discussed LNG tax from the B.C. government.
“Clarity is needed on what the tax will be,” said Skolnick.
“Once the fiscal regime is in place, then the industry knows what the rules will be.”
– With files from dailyoilbulletin.com and Business in Vancouver
