April 02, 2024 [Financial Review]-EIG, the private equity group which partnered with Brookfield for a failed $20 billion takeover of Origin Energy, has secured a foothold in Australia’s gas sector, taking a minority stake in three large projects across Queensland and Western Australia.
The Washington-based group said it would also open an office in Perth to oversee its investments in Woodside Energy’s Pluto LNG, Chevron’s monster Gorgon venture and Shell’s Queensland Curtis project.
EIG now owns a minority stake in Chevron’s Gorgon project in Western Australia.
The deal also gives Saudi Aramco an interest in Australian LNG for the first time through the Saudi giant’s $US500 million ($770.4 million) investment in EIG’s MidOcean Energy arm announced last year. It also increases the investment here by Japanese trading house Mitsubishi Corporation, which has also made a “strategic investment” in MidOcean under a deal announced on Tuesday morning Australian time.
“[Mitsubishi’s] investment is a testament to the strong fundamentals of the LNG market and MidOcean’s strategy to create a competitive long-term growth platform in LNG for its investors,” MidOcean chief executive De la Rey Venter said in a statement.
The firm has been clear it regards LNG as an important strategic fuel for the transition to low-carbon energy and that the fuel has a strong future over 30 or 40 years. In contrast, Tokyo Gas signalled in 2022 that decarbonisation was a drive for its move to sell most of its LNG interests in Australia, saying it wanted to direct resources to “growth areas”.
EIG acquired the interests in the Australian ventures from Tokyo Gas under a $US2.15 billion transaction announced in October 2022 and which was originally intended to also include the Japanese player’s stake in Ichthys LNG in Darwin before it was pre-empted by the operator of that venture, Inpex Corporation.
EIG’s MidOcean Energy arm had intended to make a bigger splash in the Australian LNG sector by buying Origin’s 27.5 per cent stake in APLNG but that arrangement collapsed when Origin shareholders rejected the takeover bid from Brookfield and EIG in December, A much earlier attempt to carve out a position in Australian LNG, through a controversial $14.4 billion bid for Santos in 2018, was also unsuccessful.
Bid Appetite
“This is finally EIG’s big LNG entrance to establish the beginning of a new global LNG platform, after a couple of false starts with its failed recent Origin bid and its Santos bid years ago,” MST Marquee energy analyst Saul Kavonic said.
“Breaking into the LNG game isn’t easy. EIG has found this out the hard way, notwithstanding their experienced team.”
Mr Kavonic said he expected EIG will still look to expand to a much greater scale in LNG and become a pre-eminent vehicle for diversified LNG exposure, foreshadowing further moves in the sector in Australia, one of the world’s top three exporters of the fuel.
“Australia will likely feature heavily in future ambitions, with EIG willing to bid for assets at more robust valuations than many others, driven by a more constructive price outlook,” he said.
“I expect EIG is still very interested in pursuing a stake in APLNG, and other long-life Australian LNG assets that may become available.”
Origin, whose portfolio includes a major domestic power and gas supply business as well as the interest in LNG exporter APLNG, has been coming under pressure from some investors to consider a demerger or restructuring that could result in the spin-off of its LNG interests after the scrapping of the takeover.
The biggest holding EIG has acquired in Australia involves 5 per cent of Pluto in WA, where Woodside has 90 per cent and Kansai Electric, the other 5 per cent. It now also owns 2.5 per cent of the second LNG train at QCLNG on Curtis Island in Gladstone and 1 per cent of the 15.6 million tonnes-a-year Gorgon plant on WA’s Barrow Island.
Woodside, which had been expected by some to pre-empt EIG’s purchase of the Pluto stake, said it would continue to consider its rights under the Pluto joint venture arrangements.
“Tokyo Gas was a founding participant in the Pluto joint venture and its support as an initial long-term customer of Pluto LNG was crucial to the project proceeding,” a Woodside spokeswoman said, adding thanks to the company for its “valued contribution” to the project.
Tokyo Gas retained its stake of almost 3 per cent in Santos’ Darwin LNG venture, which one source said aligned better with its renewed focus on methane production and lower-carbon fuels. Pre-emption rights held by the other partners in Pluto, Gorgon and QCLNG are thought to have expired late last year, while approval from the Foreign Investment Review Board is understood to have been secured more recently.
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