Friday, May 21, 2010

Sinochem buys stake in Brazil oil field

By Miles Johnson in London and Andrew Ward in Stockholm

Sinochem, the Chinese state-controlled oil company, has bought a $3bn stake in a Brazilian offshore oil field in the first sizeable Chinese energy investment into South America’s biggest economy.

The sale of a chunk of the deep water Peregrino field, owned by Norway’s Statoil, concludes a tightly contested auction process dominated by Chinese oil companies eager to establish a presence in Brazil’s large oil reserves.

White House accuses BP of ‘falling short’ - May-21.Kazakhstan drops $1.3bn case against KPO - May-21.Asian sovereign wealth funds target US shale gas - May-19..The $3bn price for a 40 per cent stake in the offshore heavy oil field marks a large return on investment for Statoil, which in 2008 bought 50 per cent of Peregrino from the US’s Anadarko Petroleum for $1.8bn as part of a package of assets.

People with knowledge of the auction said other firm offers came from Chinese state-owned oil companies Cnooc and Sinopec, and an unnamed company from India, with early interest from Total, Shell and ExxonMobil.

Statoil, 67 per cent owned by the Norwegian government, said it was a natural step to find a partner for the next stage of development and stressed its commitment to further exploration in Brazil as a “key part” of its international strategy.

In addition to selling the Peregrino stake, Statoil also agreed a memorandum of understanding with Sinochem to explore other opportunities in Brazil and elsewhere together.

Statoil is seeking fresh growth in places such as Brazil, the Gulf of Mexico and Africa to offset decline in its mature North Sea oil and gas fields.

The group saw its production on the Norwegian continental shelf decline by 7 per cent over the past year alone.

US investment bank Jefferies acted as sole financial adviser to Statoil.

The dominance of Asian companies in the late-stage bidding illustrates the increasing difficulty Western international oil operators have in financially competing for choice assets with aggressively acquisitive companies from the east.

China’s state-owned oil companies, which require state approval when purchasing foreign assets, rarely bid against each other in competitive auctions.

Sinochem is the second Chinese operator to enter South America this year after Cnooc, China’s largest offshore operator, bought a 50 per cent stake in Argentina’s Bridas for $3.1bn in March.

Sinochem already has a small presence in Colombia through its acquisition of the UK-listed independent explorer Emerald Energy last year.

The Peregrino field, discovered in 1994, is located 85 kilometres offshore in Brazil’s Campos Basin, and contains estimated recoverable reserves of between 300m-600m barrels. Production is due to start in 2011.

The heavy, viscous crude extracted from the field must be transported in heated tankers to avoid it solidifying on route.

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