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Asian Firms Muscle In on Region’s Oil Patch as Western Companies Retreat

Indonesian and Japanese companies consider bidding on more than $2 billion in assets owned by Chevron

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Written by Dan Strumpf and Kane Wu

Click HERE to Read the Article by the Publisher.


As some of the world’s biggest oil companies pull back from Asia, they’re paving the way for local rivals to take a bigger role.

The latest example: A number of Indonesian and Japanese companies are considering bidding on more than $2 billion in Indonesian geothermal assets owned by Chevron Corp., according to people familiar with the matter.

For the international oil giants, shedding assets and cutting costs is a way placate shareholders as the oil-price downturn drags on. Major oil companies own about $40 billion of Asian assets at the middle or end of their operable life, which makes them more expensive to operate, according to Wood Mackenzie—and so more likely to be sold.

“There are a lot of mature assets here,” said Angus Rodger, an energy consultant at Wood Mackenzie. “It’s a good time to clean up the portfolio.” The firm expects Western majors’ oil-and-gas production in Asia to fall by more than a fifth by 2020.

For Asian oil and gas producers—including national oil companies, or NOCs—this pruning creates a chance to take a bigger role in the region, Mr. Rodger said.

“There’s a rich history of the majors being involved in [production] in Asia,” he said. “But you have the backdrop of increasingly assertive NOCs.”

Indonesian state-owned energy company PT Pertamina is among the bidders for Chevron’s geothermal assets in Indonesia, according to people familiar with the situation. A company spokeswoman said it is reviewing whether to bid. Pertamina has a budget of about $3.5 billion for capital expenditures, she added, about 70% earmarked for so-called upstream operations—production assets.

Final bids for the Indonesian asset are due in October, people familiar with the situation said.

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Last month , Indonesia’s PT Medco Energi Internasional Tbk said it signed an agreement to buy ConocoPhillips’ 40% stake in an oil and gas block off Indonesia’s part of the northern coast of Borneo island.

The oil slump has been an obstacle to energy deals, with buyers and sellers separated by gap in “expectations of long-run oil prices,” said Scott Darling, Asia oil and gas analyst at J.P. Morgan Chase & Co. Western oil companies have been involved in $3.1 billion in pending or completed Asia deals this year, according to Dealogic—up from $1.5 billion at this time last year, though far short of the $11.7 billion in the pre-slump days of 2011.

Some parts of Asia are still drawing major oil companies. BP PLC this year has signed two production agreements with China National Petroleum Corp. to drill for shale gas in China’s Sichuan Basin. And a Chevron-led consortium announced $37 billion in new spending to boost output at the Tengiz oil field in Kazakhstan.

But they are making cuts elsewhere. Chevron, seeking to raise up to $10 billion from asset sales globally, is shopping up to $5 billion in assets in Asian markets including offshore China, Indonesia and Thailand, according to people familiar with the situation.

The San Ramon, Calif., energy giant declined to comment.

BP is considering selling its 50% stake in a joint venture with Shanghai Petrochemical Co. and state-owned oil giant Sinopec that has attracted a few interested parties—including Sinopec itself—according to people familiar with the matter. The deal that could fetch more than $1 billion, these people said.

BP, Sinopec and Shanghai Petrochemical together invested $2.7 billion in the venture, Shanghai Secco Petrochemical Co., which according to Secco’s website runs eight petrochemical plants.

A spokeswoman for Sinopec said the company is aware of the situation but hasn’t decided whether to acquire BP’s stake. A BP spokeswoman declined to comment.


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Written by Dan Strumpf and Kane Wu

Click HERE to Read the Article by the Publisher.

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