China Petrochemical Corporation (Sinopec Group), the nation's
second largest oil firm, yesterday agreed to pay US$615 million to
British Gas (BG) Group for a stake in an oil and gas field in
Kazakhstan, which boasts one of the largest finds of the past 30
years.
The deal came four days after sibling CNOOC Ltd, China's third
largest oil company, got the same one-twelfth (8.33 percent) stake
in the North Caspian Sea Project from BG at the same price.
The project includes several oil-rich geographic structures and
Kashagan oil field, with reserves estimated at up to 13 billion
barrels of oil equivalent (BOE).
With the two "cloned" deals, BG sold off all its one-sixth holdings
in the project. Other partners now include operator ENI-Agip,
Royal/Dutch Shell, ExxonMobil, TotalFinaElf, ConocoPhilips and
INPEX.
Analysts said the acquisitions mark another step in China's search
for overseas oil and gas reserves to meet its booming economy's
energy demands. It is also an important move for a country that
wants to reduce its heavy reliance on imports from the Mideast,
which accounts for 60 percent of China's imports.
For Sinopec, which has to buy over 75 percent of its oil for
processing at its many refineries, the deal is an extra blessing.
As its domestic oil production declines, the company is seeking
overseas reserves to fuel growth.
"Sinopec Group believes that the acquisition of the interest is a
significant step in achieving its strategy of expanding its
overseas oil and gas reserves," Sinopec said in a statement.
"The acquisition... will contribute to the balancing of its
downstream and upstream businesses," it said.
The long-term nature of the North Caspian Sea Project and the
further geographical diversification of its crude oil supply will
benefit the company's prospects, it added.
Though the deal is seen as "cheap," analysts also expressed their
concerns over uncertainties that may tarnish its
attractiveness.
"The reserves of 13-billion BOE are based on a very rough
estimation," said an analyst with a Beijing-based investment bank,
who declined to be named. "It is hard to evaluate the real reserves
now before it starts to operate in 2006."
And production and transport difficulties in the Caspian region, as
well as the complicated tax regime in Kazakhstan, could push up
costs, said the analyst.
"But high risk also means high return," said the official, adding
that the deal lay the foundation for the company's further
expansion overseas.
(China Daily March 12, 2003)