Thursday, May 09, 2013

STRATEGIC FORAY: Petronas purchase of Brazilian oil and gas assets raises foreign acquisitions to US$2.27 billion

PETROLIAM Nasional Bhd (Petronas)’s purchase of some oil and gas assets in Brazil for US$850 million (RM2.5 billion) will push Malaysian companies’ total merger and acquisitions (M&As) abroad to US$2.27 billion (RM6.8 billion).

The purchase will also be a shot in the arm for the national oil and gas corporation as its unit Petronas Carigali will be going up against some of the world’s top industry players to bid for exploration blocks at an auction in Brazil on May 14 and 15.

The auction, Brazil’s first such sale in four years, has attracted global interest as the South American country has one of the world’s largest hydrocarbon reserves as well as some 145 billion barrels of estimated oil reserves.

In contrast, Malaysia’s reserves amounted to 5.9 billion barrels as at end-2011.

The blockbuster Brazilian deal, which will see Petronas gain access to two offshore blocks in Brazil’s Campos Basin, is the clearest signal yet that Malaysia, often dubbed an Asian tiger, now sees the world as its stage.

This has helped local companies to take cue from last year’s headline-grabbing deals led by Sime Darby Bhd’s STG400 million purchase of London’s Battersea Power Station and Petronas’ US$5.1 million purchase of Canada’s Progress Energy Resources Corp.

This year, companies such as Genting Group and Pharmaniaga Bhd made headlines after acquiring strategic assets in the United States and Indonesia.

Genting will pay US$350 million to acquire some 35ha of land in Las Vegas to build a casino, while Pharmaniaga, a unit of Boustead Holdings Bhd, will pay US$28 million for Indonesia’s PT Errita Pharma.

Malaysia, which was Asia’s top initial public offering market last year, has seen more of its companies going abroad and striking big deals.

As a result, nearly 40 per cent of the FBM KLCI blue-chip companies’ revenues now come from abroad, a key reason why foreign investors are flocking to the local stock market.

Also, 28 per cent of the FTSE Asean 40 are Malaysian public-listed companies and three of Asean’s top five investment banks are from Malaysia.

The charge to acquire strategic foreign assets is fittingly led by Petronas, Asia’s most profitable company in 2012 according to the global business magazine Fortune.

The oil corporation’s aim to penetrate the Brazilian market finally materialised on Tuesday when it managed to strike a deal with under-pressure Brazilian billionaire Eike Batista.

Under the agreement, Petronas Brasil E&P Limitada, a unit of Petronas, will buy OGX Petroleo e Gas SA’s interest in two offshore blocks in the Campos Basin.

Petronas Brasil will acquire 40 per cent of OGX’s interest in Block BM-C-39 and BM-C-40, respectively. OGX is Batista’s flagship oil and gas concern.

Petronas also has an option to buy five per cent of OGX for 6.3 reais (RM9.31) a share in a deal valued at about US$150 million.

“The interest demonstrated by Petronas … to acquire five per cent of our company in the future shows the quality of our team of executives and our opportunities for growth,” OGX chief executive Luiz Carneiro said in a statement.

Batista, once Brazil’s richest man, has seen his fortune dwindle by US$20 billion in the past year due to lower-than-expected output from OGX.

Last year, Petronas ranked 68th in the Fortune Global 500 list.

By KAMARUL YUNUS