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Osaka Gas lines up Texan shale deal
invEstmEnt
JAPAN’S Osaka Gas has struck a deal to buy the entirety of Sabine Oil & Gas, from its par- ent company Sabine Oil & Gas Holdings, for $610mn. e deal was announced on July 29. A number of Japanese companies have attempted deals in the US shale sector but most have ended badly. Osaka Gas also owns a stake in Freeport LNG.
Sabine’s shale gas holdings are seen as com- plementary to Osaka Gas’ Freeport LNG, which is also in Texas. Holding equity in the upstream will provide the Japanese company with upside should gas prices rise, acting as a hedge to its liq- uefaction exposure. Osaka Gas also has power generation assets in the US.
e shale company has around 175,000 net acres in east Texas in the Harrison, Panola, Rusk, and Upshur counties. It produces 210mn cubic feet (5.9mn cubic metres) per day from around 1,200 wells, with additional drilling options in the Haynesville and Cotton Valley formations.
Osaka Gas acquired a first 35% stake in the acreage in Sabine’s eastern assets, which it bought in June 2018 for $146mn. Since this time, the Japanese company said these assets had been producing more than had been expected and, as a result, were generating stable cash ow. Osaka Gas went on to note it would integrate Sabine’s
management and operational capacity into its own.
e Japanese company has a long-term plan, “Going forward, beyond borders 2030”, that puts overseas energy markets as one of its growth areas.
Sabine was established in 2006. It launched a competitive sales process with TenOaks Energy Advisors, with bids being submitted by the end of June.
Osaka Gas, with Chubu Electric, signed up to participate in the Freeport LNG project in Feb- ruary 2014. e two took a 25% stake in the rst train, with both companies committing to invest around $600mn.
Singapore’s Sling dropped
PERfoRmAnCE
THE SGX LNG Index Group (Sling), Singapore’s proposed LNG hub price, has been discontin- ued. Prices will continue to be published until October 31, Energy Market Co. (EMC) said, assuming there is sufficient data for a robust price to be published. e undated EMC state- ment was reported this week by Reuters.
e Sling is a virtual price group, covering the Singapore Sling, the North Asia Sling and the Dubai/Kuwait/India (DKI) Sling. EMC and the Singapore Exchange launched the index in 2015, originally focused on Singapore. It expanded into North Asia in September 2016, and the DKI Sling in 2017.
EMC, in its comments on Sling, said there was a need for a “trusted Asian LNG spot index at selected locations”. Asia-Paci c dominates LNG demand and, driven by expanding Australian volumes, its importance is rising for production. EMC said its pricing methodology was driven by increased spot transactions, with a benchmark Asian index required to assist in price formation for longer-term supply contracts.
Sling was launched at the Gastech conference in 2015. At the time, it was reported to be based
on weekly submissions from around 20 LNG sector participants. Derivatives contracts were introduced at the start of 2016.
While Singapore is appealing as an LNG hub, with the government eager to provide support for infrastructure developments, the Sling has always struggled against competing indices. e most prominent is Platts’ JKM price, although ICIS also has an East Asian index and the Argus North-east Asia (ANEA) assessment.
Platts is the leading light in the space. It has recently launched the Asia LNG Editorial Win- dow (eWindow) and concluded its rst deal on July 31. e company’s news arm reported a spot deal between PetroChina and trader Vitol, for a standard sized-cargo priced at $4.05 mmBtu, for delivery on September 1-2.
While Singapore has been open to LNG plans, it cannot compete with the major con- sumers, Japan and China. e Tokyo Commod- ity Exchange (Tocom) was also working in this space. China is forecast to overtake Japan as the world’s top LNG importer, perhaps by 2023, according to Wood Mackenzie, making this another potential price hub.
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Week 30 01•August•2019 w w w . N E W S B A S E . c o m P9
