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Shell outlines East African growth ambitions

27 Apr 2012 20:49:41 | glm

Anglo-Dutch major Shell will seek to expand its position in Mozambique if it is successful in a takeover bid for Africa-focused explorer Cove Energy, according to Shell's chief financial officer, Simon Henry.

"We would certainly be interested in, over time, increasing [our share], but we have to close this first deal first," Henry said during a media briefing on the company's first quarter results on Thursday.

A raised bid from Shell pricing Cove Energy at £1.12bn ($1.81bn) was accepted by the Cove board on Tuesday and has been recommended to its shareholders.

The recommended offer of £2.20/share represents a 134% premium to the closing share price before Cove put itself up for sale and the formal sales process is now closed. However, there is no guarantee of shareholders accepting Shell's offer and some may be inclined to hold out to see if a competing offer is made from Thailand's state-owned PTT, which had previously raised Shell's earlier proposed offer.

Nonetheless Shell has said that its experience throughout the LNG value chain would make it a more valuable partner among the six member consortium that aims to take a final investment decision on the first phase of its large-scale liquefaction project in 2013.

"We bring full integrated value chain capability for LNG," Henry said before noting the project is "very similar to what we did in the Nigeria LNG project."

US-based independent Anadarko Petroleum, the consortium leader with 36.5%, anticipates first production from its initial two-train, 10 million tonne per annum (mtpa) Mozambique project in 2018 to be gradually scaled up to six trains.

However, with not one of the consortium members having "put an LNG plant together to that scale before" there was the suggestion that Shell may be frustrated with only an 8.5% minority share of the project.

Japanese trading house Mitsui, thought to be leading the project's LNG marketing drive, is the second largest stakeholder in the project with 20% while Mozambique's state oil company ENH has 15%.

The remaining 20% of equity is divided equally between Indian industrial conglomerate Videocon Industries and state-owned refiner Bharat Petroleum, which also has a stake in Indian LNG importer Petronet.

Norwegian exploration and production company Statoil meanwhile has confirmed on Thursday that it is close to bringing in a new partner into its neighbouring offshore Blocks 2 and 5. Shell declined to confirm whether it was in talks with Statoil, preferring instead to say it is open to negotiations. A proposed partnership is thought to be through a 25% divestment in Statoil's interest in the acreage.

Shell buoyed by LNG sales uplift

In its shorter-term trading activity, Shell's LNG sales saw a record 17% growth year on year taking it to 5.17 million tonnes over the first quarter. The growth was attributed primarily to increases in Qatari LNG volumes while additional volumes from Nigeria were related more to increases in gas supplied to the LNG plant, Henry said. A marginal increase in LNG sales from Russia was also recorded, according to Henry.

"We had a very high level of [LNG] availability performance in the Q1," Henry said.

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