Woodside has that hungry look for assets

As the timetable for the Santos asset sale program stretches on, industry circles are buzzing with talk that the biggest and hungriest fish in the Australian oil and gas pool, Woodside Petroleum, is taking a closer look, and not just at the ­coveted Papua New Guinea LNG project.

Some are saying Woodside chief Peter Coleman has his eye on a stake in the Darwin LNG project run by ConocoPhillips, which will soon need backfill gas and condensate but has expansion options.

But the more interesting chatter is that the ruler is being run over the whole company to give the Brunei-backed Scepter partners a run for their money, given Woodside’s $11.7 billion scrip bid for Oil Search has provoked a lacklustre response from shareholders of both the target and predator.

Coleman did little to douse the speculation last week when asked on CNBC whether he was kicking Santos’s tyres, answering “that’s the $64 million question” and saying Scepter’s $7.1bn move was an interesting one.

With or without Woodside, it is believed Santos’s 13.5 per cent stake in PNG LNG is providing a dilemma for executive chairman Peter Coates. As one of the world’s lowest cost and newest LNG projects, it is attracting a huge amount of interest and should fetch a good price. But for the same reason, it is the asset Santos would do well to hold on to. So there are differing opinions at the company as to how it should play out.

One thing that will encourage bidders is that PNG LNG partners ExxonMobil and Oil Search have no pre-emptive rights if Santos sells less than a controlling interest (half) of its stake. This means potential buyers of a 3.5 per cent stake of the project could spend time working out a full offer and not be concerned of being gazumped by Exxon if there’s a hint of a bargain in the winning bid.

Unofficial noise out of the process, started in August, was first indicating a big asset sale announcement in September, than it was supposed to be October. Now it is November and the only sale done, the $US50m sale of a stake in the old Stag oil platform off WA, was part of a process started before the strategic review.