Shell, Arco boost presence in SE Asia

Shell, Arco boost presence in SE Asia

SINGAPORE (Dow Jones): Royal Dutch/Shell Group (RD) and Atlantic Richfield Co. are boosting their presence in Southeast Asia's natural gas sector, despite the regional economic downturn that's halted many gas infrastructure projects in their tracks.

Shell announced last week it's agreed to an international asset swap with Occidental Petroleum Corp. (OXY), under which it will acquire the latter's holdings in Malaysia and the Philippines. Shell expects to conclude the swap within 42 days.

In Malaysia, the deal will make Shell partial owner and operator of a gas-rich block off the coast of the eastern Malaysian state of Sarawak, while raising its stake in Malaysia's third liquefied natural gas train, due to begin operation in 2001. In the Philippines, Shell will become the sole developer the Camago and Malampaya natural gas fields, taking over Occidental's 50 percent stake in the $2 billion project.

Earlier this month, Los Angeles-based Arco bought half of Triton Energy Corp.'s (OIL) gas reserves in Block A-18 in the Malaysia-Thailand joint development area, paying $150 million up front and committing to $377 million-$507 million for initial development of the block.

And in May, amid mounting economic woes and social unrest in Indonesia, Arco indicated it's raising its exposure in the country with the purchase of Union Texas Petroleum Holdings Inc. (UTH). Union Texas has more than a third of its assets in Indonesia's petroleum sector, primarily in liquefied natural gas.

Meanwhile, Arco's $3.3 billion acquisition of Union Texas reflected a premium of nearly 40 percent to the latter's share price at the time, valuing the company's Indonesian assets at more than $1 billion despite the turmoil in that country.

With the purchase, Arco gains a 37.81 percent stake in the Virginia Indonesia Co., or Vico. Vico supplies gas from the Sanga Sanga block offshore East Kalimantan to Indonesia's Bontang LNG plant, which it helps run.

The purchase was seen by industry observers as an effort by Arco to acquire LNG credentials before proceeding with marketing and development of its huge Tangguh natural gas discovery off Irian Jaya.

The discovery is estimated to hold 10 trillion-13 trillion cubic feet of gas. But industry observers say that - even more than for Malaysia's LNG Tiga project - finding contract buyers is crucial to Tangguh's development.