CNPC interested in Repsol assets

PUBLISHED : Monday, 14 April, 2008, 12:00am
UPDATED : Monday, 14 April, 2008, 12:00am

Mainland companies including China National Petroleum Corp have expressed interest in Repsol YPF, the fifth-largest oil and gas company in the world, which is considering restarting the sale of its Latin American assets that could be valued at US$10 billion, sources said.

CNPC and its listed subsidiary PetroChina operate equal joint venture CNPC Exploration for overseas acquisitions. Parent CNPC also makes acquisitions on its own.

'I can't comment on whether there has or hasn't been any primary contact on this,' said PetroChina spokesman Mao Zefen. CNPC could not be reached for comment, and Repsol YPF declined to comment.

Repsol scrapped a larger sale last year that included assets worth about US$20 billion. CNPC Exploration tried twice to arrange a sale - once on its own and again with a pair of hedge funds, but failed on both occasions.

'It's going to be a different structure than last year and will be more complicated,' said a source.

Another source said the asset sale could be valued at about US$10 billion. 'It depends on what they sell, but it looks like refineries and upstream assets,' the source said.

Some analysts thought PetroChina, if it went ahead and tried to buy a large portfolio of assets, may be taking on too much at one time.

'PetroChina is still profitable and getting bigger, so can they buy something when they are managing all their current projects? I'm not sure those guys are ready for that,' said Kim Eng Securities energy analyst Larry Grace. But the hunt for the natural resources needed to power China's surging economy will only get stronger, analysts said.

'Foreign acquisitions by Chinese corporates will be more and more frequent and natural resource companies will be particularly active as they search for the resources necessary to power the next stage of development,' said Jing Ulrich, JP Morgan chairman for China equities.

Repsol's complete Latin American business is worth about US$26 billion, according to David Stedman, who covers the stock for Daiwa Institute in London. About half of that value is in the company's Argentine subsidiary, the prime asset of last year's talks with overseas investors.

Since those failed, Repsol went on to sell a 15 per cent stake of its Argentine unit to domestic investor Enrique Eskanazi for US$2.2 billion. The deal also slated the option to sell another 10 per cent to Mr Eskanazi over the next three years.

The company has also been talking to provincial governments in Argentina about buying a 10 per cent stake. Repsol is also planning to sell a 20 per cent stake through an initial public offering this year.

In Latin America, the company owns three refineries in Peru and Brazil, according to its website, and development rights for oil and gas deposits in eight South American countries including Bolivia, Brazil Columbia and Peru. It distributes natural gas in Argentina, Columbia, Brazil and Mexico. It is the largest private energy company in Latin America, its website said.