New LNG joint venture formed

TALISMAN Energy Inc and Mitsubishi are looking at exporting liquefied natural gas from Papua New Guinea under a joint venture deal announced last Wednesday.
It was the Japanese company’s second move in a week to secure gas assets from a Canadian producer. Mitsubishi will pay about US$280 million to form a partnership on nine licences in PNG.
Calgary-based Talisman will hold about 40% stake in the licences while Mitsubishi will hold 20%.
Last fortnight, the giant Japanese industrial, trading and energy company signed a nearly US$3 billion deal with Canadian natural gas giant Encana to acquire a stake in a major British Colombia gas field that will potentially feed into a West Coast LNG export terminal.
Mitsubishi “brings extensive experience in LNG development and marketing” to the table, Talisman executive vice-president Paul Blakeley said in a statement.
“I am confident they will be a key success factor in helping us unlock the value of our Papua New Guinea assets.”
Talisman and Mitsubishi were looking to export about three million tonnes a year of LNG, natural gas that had been chilled into a liquid state, enabling it to be transported by sea in specialised tankers.
In the past, natural gas had been limited to markets that could only be served by pipelines.
As LNG, the gas could travel to global markets where demand is greatest, allowing producers to fetch a much better price than if it were to remain landlocked.
Japan is a big user of LNG, and its demand for the fuel has only grown since a massive earthquake and tsunami nearly a year ago destroyed the Fukushima Daiichi nuclear power plant, causing radioactive material to be released.
Most of the country’s reactors remain offline, and it is likely that the country will look to use other energy sources for electrical generation such as natural gas in the future.
Japan’s LNG imports jumped 12%to a record 78.5 million tonnes in 2011.
PNG has huge gas deposits in its western provinces, which Canadian, Australian and other global companies are exploiting.
The deal with Mitsubishi values Talisman’s PNG assets at US$840 million, well above CIBC World Markets’ net asset value estimate of US$250 million, wrote analyst Andrew Potter in a research note.
“Another way of looking at this deal is that it is worth approximately 5% of TLM’s current enterprise value — a substantial value for an asset that the Street and investors have largely ignored,” he wrote