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CNOOC mulls internal merger
PROJECTS & COMPANIES
STATE-OWNED China National Offshore Oil Corp. (CNOOC) is reportedly planning to hand control of its natural gas and power division to listed unit CNOOC Ltd.
Reuters reported on March 10 that CNOOC had begun reviewing a potential internal merger in 2019 and had decided to revisit the plan after CNOOC Gas & Power recorded heavy losses last year.
While the deal has its advantages, such as streamlining the internal sale of domestic gas pro- duction to CNOOC’s power plants, analysts have said the deal could spook CNOOC Ltd investors. CNOOC owns about 64% of CNOOC Ltd.
“Shareholders may have welcomed it in 2017 or 2018 when China’s gas demand soared and terminal business was robust,” Reuters quoted an unnamed Western banking analyst as say- ing. “But the timing is wrong now because of the unit’s big trading losses.”
Another source said: “Apart from internal synergy ... an extension into the mid- and down- stream gas business can be a trendy topic in the capital markets as investors increasingly favour a ‘green’ energy firm.”
CNOOC’s power and gas unit reportedly suffered its deepest loss in more than a decade from liquefied natural gas (LNG) trading. The company was caught out by slowing domestic demand that sent local prices below those agreed in its long-term contracts, the newswire said.
CNOOC invoked force majeure on LNG cargoes in early February amid government-im- posed quarantines and travel restrictions over large swathes of the country in an effort to stem
the spread of the coronavirus (COVID-19). However, Total, Royal Dutch Shell and Qatargas all rejected the notice.
Rystad Energy said in a research note released on March 10 that while CNOOC’s decision to invoke force majeure was prompted by logistical constraints at receiving ports, “there has been a growing concern in the industry that these notices are an attempt to renegotiate contracts”.
CNOOC Gas & Power owns 10 operational LNG terminals, with another three under con- struction, and is the country’s largest buyer of LNG. However, one of Reuters’ sources said the gas and power company was gearing up to hand over seven of the 13 terminals to newly estab- lished PipeChina later this year.™
Nigerian government issues sovereign guarantees for Chinese pipeline credit
PIPELINES & TRANSPORT
NIGERIA’S federal government has pledged to provide a sovereign guarantee covering most of the costs of building the Ajaokuta-Kaduna-Kano (AKK) natural gas pipeline.
Last week, Finance Minister Zainab Ahmed reported that the government would issue guar- antees worth $2.59bn for a loan from Sinosure, the Chinese government’s export credit agency. This loan will carry an interest rate of LIBOR plus 3.7% and will have to be repaid in 12 years, including a grace period of three years, she said.
According to previous reports, Sinosure is acting as guarantor for the loan on the Chi- nese side. The funds will come from two Chi- nese lenders, the Bank of China (BoC) and
the Industrial and Commercial Bank of China (ICBC). The Chinese credit will cover 85% of the total cost of building the AKK pipeline, she added. State-owned Nigerian National Petro- leum Corp. (NNPC) will pay the remaining 15% of expenses, she stated.
Ahmed said the Nigerian government saw the pipeline project as a worthwhile endeavour. “We have done an extensive review of this pro- ject and we are satisfied that the cash flows from the Ajaokuta-Kaduna-Kano gas pipeline will be sufficient to repay the facility,” she was quoted as saying by Reuters. “This project is one of the car- dinal policies of this administration and it is very strategic to national development.”
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