Mainland oil giants in joint bid for Marathon asset

PUBLISHED : Monday, 11 August, 2008, 12:00am
UPDATED : Monday, 11 August, 2008, 12:00am

Mainland oil giants China National Offshore Oil Corp and China National Petrochemical Corp are joining forces to bid for an Angolan oil and gas asset owned by United States-based Marathon Oil Corp that is expected to fetch about US$1.5 billion, sources said.

CNOOC, the mainland's largest offshore oil company and Sinopec, its second-largest oil refiner, will be up against several competing bidders including India's Oil and Natural Gas Corp and Brazil's Petroleo Brasileiro, Petrobras.

Marathon, the fourth-largest oil company in the US, will meet the bidders and select a winner over the next few days, sources said. Marathon declined to comment.

'Marathon has small non-operating positions in Angola, so it's not hugely impactful for the company as a whole for it to divest,' said Jim Byrne, an energy analyst at BMO Capital Markets.

'It could redeploy that capital into other areas that are more meaningful operating positions. Capital expenditure is going to be pretty heavy for the next few years so to redeploy some of that into oil sands would be prudent.'

The company paid US$6 billion for Canada's Western Oil Sands last year.

A joint bid by mainland players marks a change of approach from past deals where Beijing generally selected one company to move forward with an offer to avoid two Chinese companies bidding up the price.

China National Offshore Oil declined to comment and China National Petrochemical could not be reached for comment.

Marathon is selling a 20 per cent stake in an offshore oil and gas asset called Block 32, where it has drilled 11 successful exploration wells. It will retain a 10 per cent stake.

Total, the third-largest oil company in Europe, owns 30 per cent of the block. It has the right to acquire Marathon's stake but has as yet not exercised it.

Angola's state-owned oil outfit Sonangol owns 20 per cent; Exxon Mobil, the world's largest oil company, owns 15 per cent and Portugal's state-owned refiner Petrogal owns 5 per cent.

Marathon owns one other oil and gas asset off Angola's coast.

Both assets are valued at about US$4.4 billion, according to a Deutsche Bank report dated July 31. Neither is expected to begin production until 2012.

The company said it had the equivalent of 712 million barrels of oil in reserves in Africa as of December 31 last year.

Marathon at the end of July said that it was planning to split the firm in two, with a unit for exploration and the other in refining.

The company had not indicated to bidders the prospects of a larger deal at this time but said that future asset sales would occur, one of the sources said. Marathon's market capitalisation is US$33.85 billion.

Marathon sold Norwegian natural gas assets for US$375 million last month to Britain's Centrica. Its other assets are in Britain, Ireland, Indonesia, Libya, the US and Ukraine.


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