$50bn energy deals to reshape the industry

Up to $50 billion of deals could be struck in Australia’s energy industry over the next few years.

Gas pipes run through a plant at the Queensland Curtis LNG site. Picture: Bloomberg

Up to $50 billion of deals could be struck in Australia’s energy industry over the next few years as a combination of corporate takeovers, a rejig of LNG plant ownership and oil giants reshuffling their assets shake up the market.

Consultancy Wood Mackenzie says top of the list could involve current speculation about US major ConocoPhillips selling out of Darwin LNG and the nearby Barossa field in the Northern Territory. Santos has already signalled its appetite to scoop up the stakes.

“We’ve believed for some time that ConocoPhillips could sell out of Australia entirely, and recent market rumours suggest we’re not the only ones,” Wood Mackenzie senior analyst David Low said. “A sale of Darwin LNG, and the capital and emissions intensive Barossa-Caldita supply project would free up capital for buybacks and reinvestment in US tight oil — the focus of ConocoPhillips’s strategy in recent years.”

Still, Conoco would likely hang on to the Australia Pacific LNG plant it co-owns with Origin Energy and China’s Sinopec.

Italy’s Eni may also look to shift out of key Australian assets to focus on better options in the Middle East and Mozambique.

“Eni’s Australian portfolio is reliant on the depleting Bayu-Undan field that feeds the Darwin LNG plant. The undeveloped gas assets, Evans Shoal and Blacktip, offer limited potential when Bayu-Undan ceases in 2022, and Eni may prefer to focus on opportunities in the Middle East and Mozambique,” Mr Low said.

In terms of big corporate deals the Papua New Guinea-focused Oil Search, which fought off a $11.6bn bid from Woodside Petroleum, still looms as a likely target given its LNG exposure.

“Oil Search’s PNG expansion plans have run into political problems in recent months, weighing on the company’s share price. But the firm’s PNG portfolio still offers an attractive LNG growth position, and coupled with the oil-weighted Alaska assets, Oil Search might yet be an attractive proposition for a larger player with serious LNG ambitions.”

On the domestic M&A front, mid-cap producers Cooper Energy, Senex Energy, Comet Ridge and Galilee Energy could all be on the radar for buyers.