The energy giants offered 4.70 Australian dollars (4.30 US) a share for Arrow’s Australian assets including the country’s biggest holding of methane gas from underground coal seams, which is set to become a major export.
Arrow Energy unanimously recommended the 3.44 billion Australian dollar offer, up from 3.26 billion earlier this month. Shareholders will also gain one share in a new firm formed from Arrow’s assets in China, Vietnam and Indonesia.
“This transaction crystalises the value of more mature assets that have been built in Arrow’s Queensland business through the rigorous execution of our business strategy,” said Arrow chairman John Reynolds.
“In addition, we are creating an exciting opportunity for Arrow Energy shareholders to continue to participate in a portfolio of earlier-stage development assets in Australia and the broader Asian region.”
Energy companies are working on plans to cool the coal gas into liquid and ship it abroad, mainly to Asia, from Queensland’s Gladstone port, adding a new dimension to Australia’s burgeoning liquefied natural gas (LNG) industry.
Companies have already struck multi-billion dollar deals with China, Japan, South Korea and India to sell LNG produced from natural gas fields in the country’s west, earning Australia the nickname, “the Middle East of gas”.
Arrow shares dropped 19 cents or 3.59 per cent to 5.10 Australian dollars shortly after the announcement, as dealers said some investors judged the new offer too low.
The takeover needs approval by both shareholders and Australian regulators, whose decision will be closely watched after a series of high-profile Chinese attempts to buy into the country’s resources sector.
China’s Yanzhou Coal in December secured a record 3.2 billion US dollars buyout of Felix Resources, while miner Rio Tinto rejected Chinalco’s 19.5 billion cash injection in June.
Four Rio employees are currently on trial in Shanghai for alleged bribery and industrial espionage during iron ore contract negotiations, in a case that has tested Australia’s relations with its biggest trade partner.
PetroChina in August signed up for 50 billion Australian dollars of LNG from Gorgon, underlining fast-developing China’s voracious resources appetite and stoking Australia’s ambitions to become a “global energy superpower”.
Shell and PetroChina said in a statement that a final investment decision on the Gladstone LNG plant would be made in 2012. The fuel is popular partly because it is cleaner-burning than other fossil resources.
“The CSG (coal seam gas) to LNG project to be developed by the joint venture is an extremely exciting project,” said Bo Qiliang, PetroChina’s vice president.
“Shell’s and PetroChina’s technical and financial capabilities will underpin the next phase of this significant development.”