The acquisition of 1MDB’s Edra Global Energy by Chinese state-owned firm China General Nuclear Power Corp (CGN), valued at $2.3 billion (RM9.89 billion), is the largest merger and acquisition (M&A) deal of the year in Malaysia, said The Star.
Petronas’ earlier acquisition of oil and gas-related assets in Azerbaijan from Norway-based Statoil for $2.25 billion (RM9.68 billion), was the second largest transaction in Malaysia in 2015.
1MDB – EDRA – CGN
Announced in November 2015, the Edra acquisition is expected to be completed in February 2016. Through a share sale and purchase agreement, CGN is acquiring 100% of 1MDB’s energy assets, which consist of 13 power plants across five countries from Malaysia to Egypt and Bangladesh.
The Edra deal came about after a bidding process triggered by 1MDB’s desperate struggle to dig itself out of a heavy debt load and political scandal. The 1MDB affair has put Malaysian Prime Minister Najib Razak in the spotlight, embroiling his government in its biggest political controversy in years.
AZERBAIJAN’S SHAH DENIZ OFFSHORE GAS FIELD
Norway-based Statoil sold its stake in Azerbaijan’s Shah Deniz natural gas field to Petronas in April 2015. As a result, Petronas officially owns a 15.5% interest in the Shah Deniz production-sharing agreement in the Caspian Sea, a 12.4% stake in Azerbaijan Gas Supply Co and a 15.5% share in the South Caucasus Pipeline (SCP) Co.
The Shah Deniz gas field is the largest natural gas field in Azerbaijan. It is situated in the South Caspian Sea, off the coast of Azerbaijan, approximately 70 kilometres southeast of Baku, at a depth of 600 metres.
The Shah Deniz offshore field’s reserves are estimated at 1.2 trillion cubic meters of gas. The field is operated by BP which has a share of 28.8%. Other partners include TPAO (19%), SOCAR (16.7%), Petronas (15.5%), LUKoil (10%) and NIOC (10%).
Headquartered in Petronas Twin Towers, Southeast Asia’s tallest building complex, in Kuala Lumpur, Malaysia, state-owned Petroliam Nasional Berhad (Petronas) is the single largest source of Malaysian government revenue and national export earnings.
Earnings for the company have taken a pounding over the past year as global oil prices have tumbled. Its declining fortunes will add to concerns over the economic prospects of a country heavily dependent on oil exports.
Malaysia’s economic growth is slowing and the ringgit currency is one of the worst performing in Asia this year due in part to concerns over the economic outlook.
As a holding company for Malaysia’s integrated oil and natural gas concerns, Petronas’ subsidiaries operate in more than 20 countries, primarily in Asia and Africa. The company has reserves of more than 27.1 billion barrels of oil equivalent (boe) and produces about 1 million boe per day. It is a major producer of liquefied petroleum gas (LPG) and liquefied natural gas (LNG). Petronas operates more than 900 domestic gas stations. It also sells aviation fuels, kerosene, and lubricants and is a major petrochemical producer.