CNPC to Bid for Stake in Woodside's Australian Natural Gas Venture

China National Petroleum Corp, the country's biggest energy producer, offered to buy a stake in Woodside Petroleum Ltd's Browse liquefied-natural-gas project in Australia, two people with knowledge of the matter said. CNPC made a binding bid for as much as 15 percent of the venture comprising two natural gas areas off Western Australia's coast, one of the people said, asking not to be identified as the sale process is confidential. The stake may be worth up to $1.5 billion, based on Citigroup Inc estimates.

China is buying energy assets abroad and developing shale-gas resources at home to fuel expansion in the fastest-growing major economy. CNPC is the only Chinese company seeking a stake in Browse, estimated to cost $36 billion, the people said.

"Given the growth in China's gas market and the view that shale gas in China will probably take time before we see material volumes, there's a gap in terms of supply and demand that needs to be filled," said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. "So, China is exploring its options."

Woodside may reduce its ownership of Browse as the company increases exploration spending and seeks opportunities to expand in gas and oil outside Australia, Chief Executive Officer Peter Coleman said on Wednesday. The company's discussions to sell part of its Browse holding are "maturing", he said, when asked if CNPC had bid for a stake.

'Strong' interest

"The interest has been strong I can say, and we'll know over the next few months exactly what we're doing in that space," Coleman said after the gas producer reported a 4 percent decline in full-year profit.

Liu Weijiang, a Beijing-based spokesman at CNPC, said he was unaware of any deal with Woodside, declining to comment further.

Woodside on Wednesday increased the estimate for its natural gas resources in the Browse Basin by 17 percent to 439 billion cubic meters, according to a presentation by the Perth-based company. Australia's second-largest oil producer owns 46 percent of the Browse project.

Shares of Woodside rose to the highest in six months, climbing 2.5 percent to close at A$36.86 ($39.21) in Sydney. The stock recorded its biggest gain since Jan 11, while the benchmark index was little changed.

Coleman had said in August the company may sell stakes in its Browse and Pluto gas ventures to help fund the developments. Browse may cost $36 billion to build, compared with an earlier estimate of $30 billion, Credit Suisse Group AG said in November.

Potential buyers

Mitsui & Co is interested in buying a stake in the venture, according to a spokesman for the Japanese trading company.

Osaka Gas Co hasn't bid for a stake in Browse, spokesman Jun Kumagai said by telephone, when asked to comment on a Reuters report that the Japanese gas distributor was among companies that had submitted offers. The utility had indicated an interest in acquiring a stake in the venture about a year ago and is currently not in talks with Woodside, he said.

Woodside has said it's received interest from potential buyers of a minority stake in Browse, without identifying them. The company said on Wednesday that it expects to reach a final investment decision on the proposed venture in the first half of 2013.

The Australian company may fetch $1.6 billion selling 16 percent of Browse and lowering its holding to 30 percent, Citigroup estimated on Jan 27.

"Woodside's 46 percent interest in the Browse resource is valuable, despite ongoing challenges with the project," Mark Greenwood, a Sydney-based Citigroup analyst, wrote in the report.

Woodside's Coleman declined to say how much of the venture the company may sell.

That's "the question everybody would like to know", he said after the company reported its 2011 net income dropped to $1.51 billion. "We have a firm view on it. We know what that number is, but I don't think it's appropriate to share."

Chevron Corp, Royal Dutch Shell PLC, BP PLC and BHP Billiton Ltd are the other partners in Browse.

As Woodside attracts Asian interest in Browse, the Australian company is considering expansion overseas through new partnerships and "casting a very broad net", Coleman said. While the energy producer is studying shale and coal-seam gas, it intends to keep the focus on liquefied natural gas and oil, he said.

CNPC aims to increase its overseas oil and gas production to 200 million tons by the end of 2015 from more than 100 million tons last year. The company has operations in countries including Venezuela, Peru and Ecuador.

"CNPC would be interested in Australia because of its political stability and because of its experience in exporting (liquefied natural gas) to China," said Gordon Kwan, head of regional energy research at Mirae Asset Securities Ltd in Hong Kong.

PetroChina Co, its Hong Kong-listed unit, plans to spend at least $60 billion this decade on global acquisitions to build oil and gas reserves and meet domestic demand.