ConocoPhillips to sell Indonesia assets, exercises preemption for APLNG interest

ConocoPhillips is enacting two Asia-Pacific transactions aimed at lowering its aggregate decline rate and diversifying its product mix, the company said in a release Dec. 8.

Indonesia Corridor PSC

The operator has agreed to sell its subsidiary that indirectly owns the operator’s 54% interest in the Indonesia Corridor Block Production Sharing Contract (PSC) and a 35% shareholding interest in the Transasia Pipeline Co. Pvt. Ltd. (Tranasia) to PT Medco Energi Internasional Tbk for $1.355 billion. The deal is expected to close early 2022, subject to conditions.

The PSC has two producing oil fields and seven producing gas fields onshore South Sumatra. The majority of production is gas sold under long-term contracts to Indonesian and Singapore counterparties. Through Transasia, MedcoEnergi will own a minority interest in the gas pipeline network supplying Central Sumatra, Batam, and Singapore customers. MedcoEnergi expects 2022 pro forma oil and gas production of 155,000 boe/d, with capital expenditures of US$275 million.

The Indonesia assets being sold produced about 50,000 boe/d for the 9 months ended Sept. 30 and had yearend 2020 proved reserves of about 85 MMboe.

APLNG preemption

Separately, through its Australian subsidiary, ConocoPhillips notified Origin Energy Ltd. that it is exercising its preemption right to purchase up to an additional 10% shareholding interest in Australia Pacific LNG (APLNG) for up to $1.645 billion.

In October, EIG agreed to acquire a 10% interest in APLNG from Origin Energy for $1.592 billion (OGJ Online, Oct. 25, 2021). That deal received approval from the Australian Foreign Investment Review Board but is subject to the waiving of preemptive rights by ConocoPhillips and Sinopec.

Origin Energy operates APLNG’s gas fields, upstream exploration, production and pipeline system, while ConocoPhillips operates the downstream LNG export infrastructure and the LNG export sales business.

A ConocoPhillips subsidiary currently holds a 37.5% APLNG shareholding interest and would own 47.5% of upon closing if Sinopec (25%) does not exercise its preemption rights. The transaction is expected to close in first-quarter 2022 subject to Australian government approval.

ConocoPhillips’ full-year 2020 production from APLNG was about 115,000 boe/d, and full-year 2021 distributions are expected to be approximately $750 million, excluding distributions resulting from any additional shareholding interest arising from preemption.

APLNG supplies LNG to long-term buyers in both China and Japan and is currently the largest supplier of natural gas to Australia’s East coast domestic market, meeting over 30% of its total demand, said Ryan Lance, ConocoPhillips chairman and chief executive officer.