Korea Gas Corporation (KOGAS) will acquire a 20% working interest in the Umiak oil and gas field located in Canada's Arctic Mackenzie Delta area. KOGAS will pay US$20 million at closing. The company will pay another US$10 million when and if the Mackenzie Valley Pipeline proceeds or if the field achieves commercial status by some other means.
The seller, MGM Energy, acquired its 60% interest in Umiak from EnCana in May 2007. ConocoPhillips is the other partner in the development area, with an interest of 40%. MGM has stated that the sale of this 20% interest consists of 109 bcf of net mean contingent plus prospective resources. At the time of the EnCana deal MGM estimated that Umiak included net mean contingent gas reserves of 265 bcf and 25 mmbbls oil.
Umiak is 15 km east of the Taglu field which is one of three anchor fields for the Mackenzie Gas Project.
The Broader Perspective
In the last two years Korea, through KOGAS and KNOC, has been aggressively expanding its positions in oil and gas. In addition to this just announced deal with MGM the following transactions have been made by KOGAS and KNOC:
- KOGAS
- In March 2010 KOGAS entered a farm in agreement with EnCana involving expenditures of C$565 million over 3 years to earn 12,500 net acres in the Horn River and 65,000 net acres in the West Cutbank JV area in the Montney shale gas plays in Canada
- In July 2010 KOGAS reached a deal with Chevron, Apache and Kufpec to acquire a 5% interest in the Wheatstone LNG project including the upstream assets as part of a 1.5 mmtpa LNG sales agreement.
- In October 2010 KOGAS and KazMunaiGas won rights to develop the Akkas gas field in Iraq. KOGAS also won a 20% interest with TPAO and Kuwait Energy in the Mansouriya gas field development in Iraq.
- KNOC
- In October 2009 KNOC acquired Harvest Energy Trust (Canada) for US$1.7 billion.
- In mid-2010 the company launched a bid that resulted in the acquisition of Dana Petroleum. As a result KNOC acquired interests in multiple producing fields in the United Kingdom plus operations in the Netherlands and Egypt as well as acreage in Mauritania (Cormoran gas discovery in January 2011).
- In December 2010 KNOC announced a US$521 million acquisition of Canadian properties from Hunt Oil. The deal included 377,000 net Alberta acres, 53 mmboe 2P reserves, and oil and gas output at 11.7 Mboe/d.
The logic of the Umiak acquisition is questionable, at best: (1) reserves are small, (2) the potential to build on these reserves is minimal, and (3) the project's future depends on movement of the Mackenzie Gas venture.
The rest of this article provides our perspective on the developing shift in new business development and M&A opportunities and is reserved for premium subscribers...