China eyes on Aussie gas firms

SYDNEY: Oil Search, Karoon Gas Australia and InterOil are among potential acquisition targets as companies in China, the world's fastest-growing major economy, seek to snap up gas resources, Sanford C. Bernstein & Co said.

Spending on overseas acquisitions by oil and gas companies in China and India may more than double to US$30 billion ($43.96 billion) in 2010 from a year earlier, assuming oil prices stay between US$70 a barrel and US$80 a barrel, said Neil Beveridge, a Hong Kong-based analyst at Bernstein.

China is likely to keep hunting for resources that can be developed as liquefied natural gas after PetroChina and Royal Dutch Shell agreed to acquire Australia's Arrow Energy for A$3.5 billion, he said.

"Conditions are ripe for more deals," he said. "Although energy security is a prime factor in overseas M&A, the cost of acquiring proven reserves overseas is in many cases cheaper than replacing reserves domestically through the drill bit."

Oil Search, based in Port Moresby, is a partner in a US$15 billion LNG project operated by Exxon Mobil in Papua New Guinea and is the nation's largest oil and gas producer.

Papua New Guinea Government officials also signed an agreement approving a plan by InterOil to build an LNG plant in the country, the energy company announced in December.

Karoon Gas Australia, based in Mt Martha, Victoria, is ConocoPhillips' partner in a gas venture off the country's northwest coast that may have the potential to support an LNG plant. Scott Hosking, company secretary, said Karoon was concentrating on developing the gas resources.

Targets for China and India are likely to be companies with stock market values ranging between US$2 billion and US$10 billion in locations such as Africa, Latin America and Canada, said Beveridge.

- BLOOMBERG