Talisman gets Tangguh LNG stake from 1968 deal

Monday, 28 January 2008

The transaction concludes a legal dispute between the two companies arising from corporate takeovers as far back as 1968 and previous joint venture agreements under which Calgary-based Talisman argued in US court papers that it was entitled to 44 percent of CNOOC’s 17 percent interest in Tangguh.

The Tangguh project, located in West Papua, Indonesia, is scheduled to come on stream at the end of this year with a nameplate capacity of 7.6 million tones per annum of LNG.

“Such an agreement between both companies is consistent with the portfolio management strategy of CNOOC Ltd. so as to maximize shareholders’ value,” said a statement from Fu Chengyu, Chairman and Chief Executive of Hong Kong-listed CNOOC.

“With a significant presence remaining in the Tangguh project, we welcome Talisman as a new partner to further develop the gas business, which I believe, will bring generous returns to the company,” he added.

CNOOC has a 25-year agreement to buy 2.6 MTPA of LNG from the Tangguh project for the Fujian LNG terminal.

Other purchasers of the initial offtake from Tangguh are South Korean companies K-Power and POSCO, as well as Sempra Energy of the US.

BP holds more than 37 percent of the project and other stakeholders include Japanese companies Mitsubishi, Inpex, Mitsui & Co. and Sumitomo and assorted partners.

In the legal dispute filed in the District Court in Dallas County, Texas, Fortuna Resources, a subsidiary of Talisman, claimed the right to 44 percent of CNOOC’s Tangguh stake.

Fortuna was formerly known as Paladin Resources. The dispute originates from 1968, when Warrior International entered into an agreement with Independent Indonesian American Petroleum and Carver Dodge International, according to the court documents.

Warrior International merged in 1984 with Warrior Oil, which was acquired by Paladin in 1999.In 2005, Paladin was bought by Talisman for $2.5 billion. Paladin  then changed its name to Fortuna Resources.

Independent Indonesian American Petroleum's interest in the agreement was acquired by YPF Maxus Southeast Sumatra, a unit of Spain’s Repsol , the documents said.

In January 2002, CNOOC paid $585M to Repsol for oil and gas fields in Indonesia and in  September 2002, CNOOC acquired an initial 12.5 percent stake in Tangguh from BP.Talisman's case was that CNOOC had corporate obligations that survived the corporate mergers and transfers of interests since the original contract was signed. The Talisman-CNOOC deal draws a line under the legal dispute.