Global players eye EA gas market

Saturday March 3 2012

Photo/File  Shell is among those eyeing the London Stock Exchange listed oil and gas explorer, Cove Energy.

Photo/File Shell is among those eyeing the London Stock Exchange listed oil and gas explorer, Cove Energy.  

By COSMAS BUTUNYI Special Correspondent

The race for a slice of East Africa’s natural gas market is taking shape as cash-rich suitors line up to acquire oil and gas explorer, Cove Energy, which operates in Kenya, Tanzania and Mozambique.

Global energy firm Shell is among those eyeing Clove Energy. The planned acquisition through Shell Exploration and Production, an indirect, wholly-owned subsidiary, will mark its entry into Kenya and Mozambique.

Bangkok-based petroleum firm PTT Exploration and Production Public Company is also interested in the London Stock Exchange listed Cove Energy.

If the bid goes through, it will be Shell’s first foray into the East African region and the second on the continent.

PTTEP has operations across more than 13 countries, with Algeria as the sole investment in Africa.

While Shell’s proposed offer is valued at £992.4 million ($1.5 billion), PTTEP’s stands at £1.1 billion ($1.8 billion).

In their offers, both firms indicated that the proposed deal is subject to the consent of Mozambique’s Ministry of Mineral Resources as required by a contract for Cove Energy’s interests in the country.

However, in a statement, the Cove Energy board insisted that while discussions are ongoing with the two firms, there is no certainty that any offer would be made for the company, and the level of any proposal or offer that may be made.

“The board reserves the right to reject any approach or terminate discussions with any interested party or participant at any time,” it stated.

In its bid, Shell, which rates itself as one of the world’s largest liquid natural gas producers, describes East Africa as “a major prospective hydrocarbon province, which has seen a significant increase in exploration activity in recent years.”

In joint ventures with partners, Shell produces liquid natural gas in Australia, Brunei, Malaysia, Nigeria, Oman, Russia and Qatar.

The company notes that last year, it jointly supplied more than 30 per cent of global liquid natural gas volumes.

PTTEP, on the other hand, which is listed on the stock exchange of Thailand, describes itself as “one of the largest producers of oil and gas in Asia,” and only recently, took up a 40 per cent stake in the Kai Kos Dehseh Oil Sands Project in Canada.

Besides the consent of the minister, which both suitors are insisting on as a pre-condition for announcing a firm intention to make the proposed offer, PTTEP has indicated that the Cove Energy board recommend the proposed offer unanimously on an unqualified basis and that its directors provide an irrevocable undertaking to accept it or vote in its favour.

However, even before a firm intention announcement is made, the formal sale process is under way, according to the parties.