21 December 2010
South African petrochemicals giant Sasol is to acquire a 50% stake in Canadian firm Talisman Energy’s Farrell Creek shale gas assets, located in the Montney basin of British Columbia, for approximately C$1.05-billion (about R7.1-billion).
In terms of the deal, Sasol will pay C$262.5-million in cash and fund 75% of Talisman Energy’s portion of costs to develop Farrell Creek until the total purchase price is paid (a balance of C$787.5-million).
Talisman Energy will retain the remaining 50% interest and continue as the operator of the Farrell Creek assets, that include associated gas-gathering systems and processing facilities.
“The acquisition of this high-quality natural gas asset will accelerate our upstream growth while also potentially advancing Sasol’s already strong [gas-to-liquids] value proposition utilising our proprietary technology,” Sasol CEO Pat Davies said in a statement this week.
“We’re very pleased to be partnering with an experienced international shale gas operator such as Talisman, allowing us to reap the dual benefit of leveraging their experience, as we grow our own shale gas expertise.”
Strategic, unlocking value
The location of the Farrell Creek assets, with its low operational risk and the proximity of, and access to, the existing North American pipeline infrastructure, makes the Farrell Creek assets sustainable on a long-term, stand-alone basis.
The existing pipeline infrastructure in North America also allows for other gas monetisation options in the future, such as providing for the potential to use the gas as feedstock in an integrated gas-to-liquids (GTL) project in the region.
Assets included in the transaction cover over 51 000 acres of land, representing an estimated contingent resource of 9.6-trillion cubic feet.
“This is a strategic move towards unlocking some of the value of our Montney assets for us and our new partner, consistent with the strategy of de-risking and developing Talisman’s very large shale opportunities in the region,” said Talisman Energy CEO John Manzoni.
“We believe this transaction reflects the quality and potential of our broader Montney position. We are delighted to have Sasol as a partner. They are a world-class company and their expertise will enable us to jointly explore the option of a GTL facility in western Canada.”
Joint feasibility studies
As part of the agreement, Sasol and Talisman have agreed to conduct a feasibility study around the economic viability of a facility in western Canada to convert natural gas to liquid fuels using Sasol’s GTL technology.
“This could provide a strategic alternative to traditional North American pipeline or liquid natural gas marketing,” the statement read. “The two companies have also agreed to collaborate on other western Canadian natural gas opportunities.”
The transaction is conditional upon the exchange control approvals required by the South African Reserve Bank and other regulatory approvals required. Sasol expects the transaction to close within the first half of 2011.
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