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Petronas tipped for Texaco stake in



Subject: Petronas tipped for Texaco stake in Burma 

 23 May 1997 

The Nation 
Petronas tipped for Texaco stake in Burma 

US sanctions prompt takeover talks 

BY PICHAYA CHANGSORN 

MALAYSIAN national oil exploration company Petronas Carigari is one of the 
most likely buyers of the stake held by US-based Texaco Inc in Burma's Yetagun 
gas field, following US sanctions, informed sources said. 

Although the US administration announced sanctions only on new investments in 
military-ruled Burma last month, and they would not apply to an existing 
investment like the Texaco gas project, industry sources said Texaco is 
negotiating with a number of oil and gas companies to take over its 40 per 
cent stake in the Yetagun gas field. 

Among the most likely buyers is Petronas Carigari, the petroleum exploration 
and production arm of Malaysian national oil company Petronas. 

''Petronas is trying to build its empire in countries around Thailand, which 
is the Southeast Asian's largest market for gas," a source said. 

Thailand, through national oil company Petroleum Authority of Thailand, 
earlier this year signed a gas sale contract with the Yetagun consortium. To 
be combined with gas from the giant Yadana field, PTT will pipe it to the 
Electricity Generating Authority of Thailand's (Egat) power plants and a 
private power plant in Ratchaburi partly owned by Texaco. 

Petronas has become a strong contender for buying the Yetagun stake from 
Texaco since it is offering to swap its stake in a Malaysian field for the 
Yetagun stake. 

James Houck, general manager of Texaco's global gas and power business who 
came to Thailand yesterday to sign the power purchase agreement contract with 
Egat, refused to comment on the Texaco issue. Texaco's Thai power project, 
which includes Thai energy and mining group Ban Pu Plc and Black & Veatch of 
the US as equity partners, plans to use gas from Burma. 

Houck, however, said according to his understanding, the US sanctions do not 
apply to the Texaco project. 

Texaco chief executive Peter Bijur was quoted earlier by wire service agencies 
as saying at the company's annual shareholders meeting that the company would 
consider selling its Yetagun gas stake. 

However, sources said Unocal Corp, which is the second largest shareholder in 
the Yadana project, has no plans to sell its stake in the gas-rich block. 

''The Yetagun field is minimal to Texaco, but for the smaller Unocal, Yadana 
is important," said an analyst. 

Other contenders for the Yetagun stake include Ban Pu and Indonesian state oil 
company Pertamina, sources said. 

A senior executive of Ban Pu said due to the relationship in the power joint 
venture, Ban Pu might have a chance to buy a stake in the Yetagun field from 
Texaco, although there is no agreement which obliges Texaco to make the offer. 


''The issue is price. However, we will certainly not purchase all of the 40 
per cent stake because it would mean a huge amount of money," he said. 

Having a stake in the proven oil and gas field would fulfil Ban Pu's hopes of 
becoming an integrated energy company, while helping its power generating 
business. 

The company is currently engaged in coal mining, trading and the power 
business. 

Other existing shareholders in the Yetagun field are British firm Premier Oil, 
Nippon Oil and PTT Exploration and Production Plc. 

It has not yet become clear the scope of US sanctions, especially regarding 
existing projects. ''For example, could Texaco sign new contracts for 
construction work at its existing Yetagun project? The company has now stopped 
and can do nothing," said a source in Burma. The Ban PU/Texaco/Black & Veatch 
consortium, called Tri Energy Co (TECO), yesterday inked the PPA with Egat. 
TECO will use gas from Burma to feed its 700 megawatt power plant. The gas 
sales contract was also signed yesterday between TECO and domestic gas 
supplier monopoly Petroleum Authority of Thailand. 

The signing made TECO the second consortium, after the Thai 
Oil/Unocal/Westinghouse consortium, to ink a power purchase contract with Egat 
under Thailand's first independent power producer programme. 

''This PPA is worth not less than Bt100 billion and the gas contract is worth 
about 70 per cent of that," said Chira Phanupong, chairman of TECO and Ban Pu. 


Houck said the transparent manner in which Egat held independent power 
producer bids has made investing in Thailand's power generating industry 
attractive and Texaco will participate in the second IPP round by proposing 
the expansion of the TECO generating capacity. 

The PPA was concluded at Bt1.303 per kilowatt-hour. TECO President Rawi 
Corsiri said the company is expected to wrap up its project financing deal 
within two months. TECO will lend 75 per cent of the project cost, which will 
total Bt11 billion. Over 80 per cent of the loan will be in US dollars. The 
construction will take place next summer and commercial operations are slated 
to begin on May 1, 2000. 

Egat, Electricity Generating Plc and General Electric are some of the 
companies vying for operating and maintenance contracts for the TECO power 
plant. 

Yadana and Yetagun gas is scheduled to be shipped to Thailand beginning in 
mid-1998 and 1999, respectively.