BP Amoco-Arco to become Asia's top gas producer

BP Amoco-Arco to become Asia's top gas producer

SINGAPORE (Bloomberg): BP Amoco Plc's purchase of Atlantic Richfield Co. will make the merged company Asia's No. 1 non-state natural gas producer, giving it access to the world's fastest growing natural gas markets in China and Japan.

London-based BP Amoco, the world's third largest publicly traded oil company, said U.S. antitrust authorities yesterday approved its US$33 billion buyout of Atlantic Richfield, known as Arco.

"The merger will make us the largest in natural gas in Asia, larger than Exxon and Shell," said Amir Hamzah, media and public relations manager at Arco Indonesia. "This give us even more resources to develop our natural gas business in Asia."

Arco has more than 14 trillion cubic feet of proven natural gas reserves in Indonesia, worth more than $50 billion at current prices. Japan, China and South Korea are turning to natural gas for power generation as it burns cleaner than crude oil or coal.

Demand growth in Asia is estimated at about 6 percent a year.

"Our marketing efforts in countries like Japan and China will be strengthened," said Amir. The merged BP Amoco-Arco will control about 7 percent of proven natural gas reserves in Southeast Asia.

"Everyone realizes natural gas is the fuel of the moment and Asia is the highest growth region," said Peter Hitchens, an oil analyst with brokerage Williams de Broe in London, which has a "sell" recommendation on the company.

Indonesia's state-owned oil and gas company PT Pertamina and Malaysia's state-owned oil company Petronas are the biggest holders of natural gas reserves in Southeast Asia.

While BP Amoco had to sell Arco's prized stakes in Alaskan oil fields to win over antitrust regulators, it appears to face few obstacles in expanding control over Asia's natural gas market.

Arco in 1998 bought a 25 percent interest in the Malaysia- Thailand Joint Development Area in the Gulf of Thailand. It contains an estimated 5 trillion cubic feet of natural gas.

In China, the main asset BP Amoco will acquire is a more than one-third stake in the Hainan natural gas field and related pipeline, said Simon Lang, BP Amoco's China vice-president for gas and power.

The field is China's largest offshore natural gas find with 3 trillion cubic feet of reserves.

Arco operates the field and pipeline together with state-run China National Offshore Oil Corp., which has a 51 percent stake in the project. Kuwait Foreign Petroleum Exploration Co. holds the remaining 15 percent stake in the field.

Lang declined to provide any further comment on how the merger would affect BP Amoco's China operations.

BP Amoco's acquisition of Arco could yield some benefits for Zhenhai Refining and Chemical Co., company officials and analysts said.

Arco owns about 9 percent of Zhenhai, which could rise to 20 percent if convertible bonds purchased in 1996 are exercised, said Zhenhai's Secretary Su Dewen.

"To have a major global player like BP Amoco become a key shareholder in our company is definitely a good thing, although we will still have to take some time to study exactly what this will mean for the company," Su said.

BP Amoco's stake in Zhenhai would pave the way for joint ventures between the two, said Gordon Kwan, a petrochemical analyst at HSBC Securities (Asia) Ltd.