BG May Seek Asia LNG Assets After Origin Bid Failure

By Angela Macdonald-Smith

Oct. 9 (Bloomberg) -- BG Group Plc, the U.K.'s third- biggest oil and gas company, will probably seek alternative investments in the Asian liquefied natural gas industry after its bid for Origin Energy Ltd. failed, Macquarie Group Ltd. said.

Such assets would help boost the Reading, England-based company's LNG project pipeline, which is looking ``a bit thin,'' and improve its ability to profit from the ``premium-priced'' Asian gas market, Macquarie said in an Oct. 8 report. BG said it ``continues to screen opportunities that add value to the global business.''

BG, the biggest LNG importer into the U.S., last month let a A$13.5 billion ($9 billion) hostile offer for Australia's Origin lapse after the Sydney-based target attracted an investment of as much as $8 billion from ConocoPhillips. In February it joined Queensland Gas Co. in an alliance for a A$8 billion LNG venture in northeast Australia to tap rising demand in north Asia.

``BG's failed bid for Origin Energy displayed errors in tactics rather than strategy; we believe it will continue to seek opportunities in the region close to the premium-priced Asian LNG markets,'' London-based Macquarie analysts Iain Reid and Brendan Warn said in the report.

BG is ``building a strong presence in Asia-Pacific and Australia in particular,'' Rob Millhouse, a spokesman for the company in Australia, said in an e-mail.

`Quick Progress'

``Importantly, our plans in Australia, initiated with our February 2008 acquisition of interests in, and alliance with, Queensland Gas, were independent of other opportunities,'' Millhouse said. ``In this context we continue to progress quickly the planning and development of the Queensland Curtis LNG project at Gladstone.''

BG produces LNG in Trinidad and Egypt and its most advanced planned venture is the 14.25 percent-owned OK project in Nigeria, which is suffering delays due to ``political resistance'' and may be shelved altogether if those obstacles can't be resolved, Macquarie said. That would dent the company's ability to expand global LNG production capacity 71 percent to 12 million metric tons a year by 2015, as currently modeled, it said.

The U.K. company still has ``one of the best LNG businesses in the global oil and gas sector'' for its size, Macquarie said. The contracts BG has to buy gas indicate it sells 85 percent more LNG than it produces, Macquarie said. The LNG business, together with BG's exploration success in Brazil, are the main factors making the stock the top pick among seven European oil and gas companies, along with Portugal's Galp Energia SGPS SA, it said.

LNG is natural gas cooled to liquid form, reducing it to one-six-hundredth of its original volume, for transportation by tanker to destinations not connected by pipeline.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net