Shell completes Repsol LNG asset deal

02 January 2014 14:37 Source:ICIS

Anglo-Dutch major Shell has finalised the acquisition of Repsol’s LNG assets outside North America for $3.8bn net, $600m less than the figure originally announced last year, the two companies said in separate statements on Thursday.

Shell agreed to pay $4.4bn to the Spanish oil and gas company in February 2013 for a range of assets which strengthen the Anglo-Dutch major’s LNG position in the Americas and wider Atlantic Basin.

The original purchase price was amended to include the exercise of pre-emption rights of the Bahia de Bizkaia Electricidad (BBE) combined cycle gas turbine (CCGT) plant in Spain to British major BP, as well as other adjustments such as the financial performance of the Repsol LNG portfolio, Shell said. BP paid $200m to Repsol for a 25% stake in the 785MW CCGT in Bilbao in October 2013, a move which further reduced the Spanish company’s debt burden

Repsol said that the combined BBE and LNG asset sale reduced its net debt by $3.3bn. The Spanish company also said it had now beaten its target of divesting €4.0bn-4.5bn ($5.46bn-6.15bn) as part of its 2012-2016 strategic plan, which was launched after the Argentine government’s April 2012 seizure of its majority stake in South American oil and gas producer YFP.

Shell will now add 7.2mtpa of LNG in long-term offtake agreements, as well as over 4.2mtpa on equity LNG by taking a 25% stake in the Peru LNG plant and between 20-25% across the four Atlantic LNG liquefaction trains in Trinidad.

The Anglo-Dutch major will also secure the rights to offtake all the volumes from the 4.45mtpa Peru LNG liquefaction facility in Pampa Melchorita. However, it will also take over Repsol’s existing 15-year long-term contract to supply Mexico’s state-run CFE with up to 3.68mtpa of LNG from Peru into the Manzanillo terminal.

That deal, originally signed in 2007, is priced at a discount to US Henry Hub prices, a significantly lower rate than global prices, and although Peru’s state-owned oil and gas regulator Perupetro has held talks with the CFE to amend the contract, the respective parties have yet to reach an agreement.

By Ben Wetherall