KUALA LUMPUR (May 14): Japan Petroleum Exploration Co Ltd (Japex) is selling its 10% ownership interest in the North Montney joint venture undertaking a shale gas project in Canada to Petronas Energy Canada Ltd (PECL), a subsidiary of Petroliam Nasional Bhd (Petronas) which operates the project.

In a statement, Japex said its overseas incorporated subsidiary Japex Montney Ltd (JML) — which holds the 10% stake — signed the contract concerning the interest sale with PECL yesterday, with the transaction expected to be concluded by the end of June.

"As a result of this transaction, Japex expects to record an extraordinary loss of approximately C$493 million (about ¥39.4 billion) in the consolidated financial results for the second quarter of the fiscal year ending March 31, 2022 (FY22)," it said, adding that the impact has already been reflected in its forecast of consolidated business performance for FY22.

Petronas currently owns a 62% stake in the project, while Sinopec oil holds a 15% stake, followed by Indian Oil Group with 10% and Petroleum Brunei Group with 3%.

According to Japex, it was exiting the project as it would be difficult for JML to stage an early recovery of its performance, given that the oil exploration and production (E&P) business has become more challenging amid the Covid-19 pandemic since early last year, coupled with structural changes caused by the coronavirus and accelerating global decarbonisation.

It also formulated a medium-term business plan in 2018 "with the recognition of the necessity to transform our business structure for the sustainable growth even in the market environment of US$50-60 per barrel".

"Based on the recognition, our E&P projects have been striving to improve their profitability by optimising the business portfolio, including the sale of the asset," it said.