By Niluksi Koswanage and Nidhi Verma
KUALA LUMPUR/NEW DELHI (Reuters) - Malaysia's Petronas is in talks to sell 10 percent of its Canadian shale gas assets to Indian Oil Corp
State-run Petronas last year bought Canada's Progress Energy Resources Corp in a C$5.2 billion deal that gave it shale gas properties in northeastern British Columbia.
In March it sold a 10 percent stake in the integrated shale gas development and liquefied natural gas project to Japan Petroleum Exploration (Japex) <1662.T>. Financial details of that deal have yet to be revealed publicly.
Terms of a potential deal between Petronas and state-run Indian Oil have not yet been worked out, the sources said.
Indian Oil did not have immediate comment and officials at Petronas could not immediately be reached for comment.
"Petronas has not opened this to anyone else, it prefers to directly approach one company at a time," said a source with direct knowledge of Petronas' commercial strategy.
The source ruled out the sale of a stake to Chinese companies if a deal with India does not materialise.
China's CNOOC Ltd <0883.HK> completed a contentious takeover of Canada's Nexen Inc in February. Ottawa approved that deal only after making clear it would not allow foreign state-owned firms to build up dominant positions in the Alberta tar sands.
"One thing is for sure, Petronas will not go to Chinese companies if the India deal falls through as Chinese companies are pretty active in the sector," the person said.
Kazakhstan earlier this month blocked India's plan to buy ConocoPhillips'
Indian Oil, the country's biggest refiner, wants to expand its portfolio of exploration and producing assets while Petronas wants to share some of the costs of getting into the Canadian shale sector and bringing in cheaper LNG supplies from North America to energy-hungry Asia.
Indian Oil is likely to choose an investment bank advisor soon, two banking sources said.
One banking source competing to represent Indian Oil on the transaction said a deal was likely to include a "long-term attractive offtake" agreement for gas.
The Canadian unit of Petronas earlier this month sought approval for LNG exports from Canada's Pacific Coast.
India last month decided to link prices of locally produced gas with global benchmark, paving way for a rise in prices from April 2014 and making LNG imports attractive.
Indian companies, like their Asian peers, have been scouting for oil and gas assets abroad to meet rising local demand.
A consortium of state-run Oil and Natural Gas Corp
(Reporting by Niluksi Koswanage in KUALA LUMPUR and Nidhi Verma in NEW DELHI; Additional reporting by Sumeet Chatterjee in MUMBAI. Editing by Tony Munroe and David Evans)
