Shell Expands LNG Portfolio in the Americas, Closes $4.4 Billion Asset Deal

Camisea Project (Peru), image: Repsol

(Bloomberg) — Royal Dutch Shell Plc, the world’s largest supplier of liquefied natural gas, agreed to buy LNG assets from Repsol SA for $4.4 billion in cash to expand in Latin America and Spain.

The deal, which helps the Spanish oil company avoid a credit-rating downgrade to junk, gets Shell export capacity in Peru as well as in Trinidad and Tobago, The Hague-based company said in a statement today. Shell will take over financial leases and assume debt, bringing the transaction’s total value to $6.7 billion. Repsol’s Canaport terminal in Canada, which imports gas into North America, was not sold.

“Shell’s worldwide LNG supply position and customer base means we are uniquely positioned to add value to Repsol’s LNG portfolio, including through Shell’s trading capabilities,” Chief Executive Officer Peter Voser said in the statement.

The deal was the centerpiece of Repsol’s plan to maintain its investment grade rating. Moody’s Investors Service cut its rating to one level about junk and gave the company a negative outlook after Argentina seized Repsol’s YPF SA business in April without compensation. YPF made up almost half of Madrid-based Repsol’s oil reserves.

Argentina’s nationalization followed the Spanish company’s January 2012 announcement of the discovery of 22 billion barrels of potential oil in shale rock in Argentina. Repsol is seeking $10.5 billion for the 51 percent stake in YPF it lost.

Net Debt Reduced

Spain’s largest oil company will book a $3.5 billion pretax capital gain and reduce its net debt by 2.2 billion euros ($2.9 billion) from the 4.4 billion-euro total last year.

Shell will acquire part of a Spanish LNG import terminal and agreed to supply about 1 million tons of the cooled fuel to Repsol’s regasification plant in Canada over a 10-year period, according to the statement.

Canaport was offered for sale and will be written down for $1.3 billion. Its 25-year commitments to ship gas into North America were considered a hurdle to closing the deal as the continent’s domestic gas supply swelled from shale fields, two people familiar with the matter said earlier this month.

Repsol’s contracts through Canaport soured after the extracting of gas from shale rock created a glut of the commodity and caused prices to plunge. Shipments from Canaport have fallen 42 percent this winter compared to the year before, Bentek Energy LLC data reported by U.S. regulators show.

– Patricia Laya, Copyright 2013 Bloomberg.

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