Sinopec parent buys into Egypt oil-gas project
China Petrochemical maintains stake-building stance overseas with US$3.1 billion deal for an interest in asset held by Apache of the US
China Petrochemical Corp, the parent company of China Petroleum & Chemical (Sinopec), has agreed to acquire a one-third stake in the Egyptian oil and gas operations of United States-based Apache for US$3.1 billion, making it its first foray into politically troubled Egypt.
The investment, coupled with rival PetroChina's recent indication that it has been in advanced talks to team up with global oil and gas giant Exxon Mobil to develop the latter's oilfield in Iraq, highlights the resolve of Chinese state energy firms to enhance national energy security despite the Middle East and North Africa's heightened geopolitical risks.
China Petrochemical said the investment would add oil and gas output of 130,000 barrels of oil equivalent a day, which amounts to 8.7 per cent of its daily production of 1.5 million barrels last year, according to Bloomberg.
The company is the world's second-largest oil refiner and China's second-largest oil and gas producer.
It has been the most aggressive buyer of overseas assets in the past few years, among the three mainland state-backed oil and gas exploration and production majors.
The acquired assets are located in Egypt's West Desert, and are estimated by China Petrochemical to have recoverable proved and probable reserve of 641 million barrels of oil, and natural gas equivalent to 632 million barrels of oil.
"There definitely does seem to be a resurgence in overseas [mergers and acquisitions] by Chinese companies," said US analyst Neil Beveridge. "The potential of PetroChina going back into Iraq and this deal in Egypt show a willingness to take on more risk in this part of the world."
PetroChina president Wang Dongjin last week confirmed that it was in talks with Exxon Mobil to jointly develop the Iraq field.
PetroChina already has a few oil projects in the nation whose security has suffered due to frequent suicide bombings.
China Petrochemical's deal, expected to close during the fourth quarter, is its biggest since the 9 per cent stake purchase in 2010 of oil sands resources developer Syncrude Canada for US$4.65 billion, according to Bloomberg.
Chinese companies have completed 83 overseas oil and gas purchases worth US$100.7 billion in the past five years, its data showed.
Beijing has provided cheap loans to its state-backed oil and gas firms to acquire resources abroad and forge long-term co-operative relationships with oil and gas rich nations, as the mainland's foreign oil and gas dependence has been increasing rapidly.
It now imports close to 60 per cent of its crude oil needs and 25 per cent of its natural gas consumption.
A military coup last month toppled former Egyptian president Mohammed Mursi, sparking protests that have killed at least 1,000 people.
Mursi became the first democratically elected president a year ago after Hosni Mubarak's 29-year reign ended in 2011 following calls for his ouster as the Arab spring, the term used to describe protests against autocratic rulers in the Middle East, swept across the region.