PetroChina seeks to divest Australian and Canadian assets to offset losses

by Tess Hutchinson June 29, 2022

written by Tess Hutchinson June 29, 2022

PetroChina headquarters in Beijing, China. Credit: Charlie Fong/commons.wikimedia.org.

PetroChina plans to sell natural gas projects in Australia and oil sands in Canada to focus on more profitable sites in Africa, the Middle East and Central Asia, reported Reuters.

The report said PetroChina fears these assets could face sanctions from Western countries following the Russian invasion of Ukraine.

Two undisclosed sources told the publication that the sale of PetroChina’s assets comes shortly after an internal review of its global portfolio that began in 2021.

The sale is also driven by the “disappointing economics” of the assets, which suffered huge losses. These assets are in areas that PetroChina considers “tough to compete” over the next two years, the sources said.

Assets being considered for sale include Arrow Energy, which was bought by PetroChina in 2010 through a joint venture with Shell.

Arrow Energy bought a stake in the Browse project, Australia’s largest untapped gas resource, from BHP in 2013.

From 2018 to 2021, Arrow recorded losses of around A$3.3 billion ($2.29 billion), including A$2.2 billion in write-downs, making it the go-to investment. PetroChina’s most loss-making foreign company.

The Browse project is presented as a technological challenge and the start of production seems unlikely, despite the final approval, until 2030.

One of the sources was quoted by the news agency as saying: “Australian gas assets, both Arrow Energy and Browse, are considered among the top ‘negative assets’ in PetroChina’s global portfolio. This is also an area where CNPC has few competitive advantages.

In Canada, PetroChina intends to sell its wholly-owned MacKay River Oilsands and Dover Oilsands projects, due to losses related to the production and processing of tar-type fuel into bitumen.

One of the sources familiar with the matter said PetroChina was “unhappy” with the relatively high production costs of the two $70-a-barrel Canadian projects. Both sites are also facing dissatisfaction from local residents due to their impact on the environment.