CALGARY (CP) -- Oil and gas giant Talisman Energy Inc. [TSX:TLM; NYSE:TLM], one of Canada's most international oil and gas producers, has bought a small portion of an Indonesian liquefied natural gas project for US$212.5 million.
The Calgary-based company acquired its 3.06% stake in the Tangguh project from China National Offshore Oil Corp. through the transfer of an indirect subsidiary.
The deal was part of a settlement of a commercial dispute between Talisman and Chinal National over ownership stakes in the project.
The Tangguh project, headed by British Petroleum, consists of gas wells off the island of West Papua and an LNG complex with a capacity of 6.9 million tonnes annually.
The US$5-billion development, now nearing completion, is operated and 37% owned by BP Indonesia. First production is expected later this year.
LNG projects are springing up around the world as the natural gas business, formerly regional in nature, becomes a global market just like oil. Where producing fields were once linked to consumers via networks of natural gas pipelines, the new market will see gas frozen into liquids and shipped overseas via specialized tanker to global markets.
That means gas output in Russia, the Middle East, Africa and South America can be delivered via tanker to consumers in Europe, the United States and Canada, just as petroleum is today.
In Canada, LNG projects have been proposed for the East and West Coasts to link up with the continental pipeline network that serves central Canada and the United States.
In Indonesia, the Tangguh fields have proven reserves of 14.4 trillion cubic feet of clean gas, which is to be transferred by undersea pipelines to an LNG processing plant and on to markets in the Asia Pacific region and North America, the company said.
Talisman had been reported earlier this month to have settled a legal dispute in which it was claiming a substantial share of CNOOC's [NYSE:CEO] 17% interest in the project.
''I am pleased with this settlement,'' Talisman CEO John Manzoni said in a statement Monday.
''The purchase marks the end of a longstanding contractual disagreement inherited by both parties. I look forward to further developing our business in the region and building on our relationship with CNOOC Ltd.''
North American natural gas prices have been depressed recently, leading to decreased drilling activity. Liquefied natural gas, most of which currently ends up in Canada and the U.S., has been cited by many experts as a ''wild card'' when it comes to whether prices can recover any time soon.
By condensing the gas into a liquid in ultra-cold temperatures, it can be more easily stored and transported to higher-demand markets like Asia and Europe, where it can be sold for a better price.
The Tangguh project is Talisman's second acquisition so far this year. Earlier this month it took over oil and gas junior RSX Energy Inc. [TSX-V:RSX] for C$106 million.
Andrew Potter, an analyst with UBS Investment Research, gave Talisman a ''buy'' rating and set a share price target of C$22.
''Overall the increased exposure to Tangguh's long-life reserves and added growth visibility is positive but too small to really impact TLM,'' he wrote in a note to clients.
There are probably more acquisitions to come for Talisman, Potter wrote.
''We would not be surprised if TLM looks to enhance existing international assets through acquisitions (North Africa and Southeast Asia being focus areas) and also look at adding exposure to new strategic areas such as unconventional gas and/or oil sands.''
Talisman, formerly BP Canada, is an international energy producer, with natural gas operations in Western Canada and the United States, oil and gas projects and exploration in the North Sea, Southeast Asia, South America and Africa.
Talisman fell 5 cents to close at C$16.39 on the Toronto Stock Exchange on Monday in trading of more than 3 million shares.
(c) The Canadian Press 2008