China National Petroleum Corp, the largest oil producer on the mainland, has had its acquisition of United States-based Devon Energy's West African assets thrown into doubt over valuation disagreements, according to sources.
CNPC several weeks ago topped a number of competitors with the highest bid of more than US$2 billion for the oil and gas assets that Devon put on the block. The bid was short of the US$2.5 billion it earlier indicated was a fair price.
Now, after weeks of talks, a deal still has not yet been signed and a quick fix is unlikely to be found, sources said.
CNPC, it is said, felt its bargaining position was strong because it placed the largest bid and Devon said publicly many times it considered the assets non-core to its main business.
Devon said in January it wanted to shed its African assets to concentrate on exploration in Brazil and the mainland. In April it said that it planned to drill seven wells in the Panyu field in the western South China Sea, according to a Bloomberg report. Devon has a 24.5 per cent stake in the field.
If the deal is sealed CNPC may hold on to the assets or transfer them to the 50/50 joint venture it runs with Hong Kong-listed subsidiary PetroChina.
The assets for sale, located in Equatorial Guinea, Ivory Coast, Nigeria, Gabon, Ghana and Angola, have 300 million barrels equivalent of proven and probable reserves according to a source.
Devon Energy said in January that production this year would be the equivalent of about 11 million barrels of oil.
Other interested foreign bidders included such companies as India's Oil and Natural Gas Corp; London-based Tullow Oil; and Canadian Addax Petroleum.
The mainland's larger oil companies are seeking assets abroad as domestic fields dry up and demand at home soars. China National Offshore Oil Corp, the mainland's third-largest oil company, last year took a 40 per cent stake in an oil and gas find off the Nigerian coast called OML 130. Total, the third-largest oil company in Europe, holds a 30 per cent stake while Nigeria's state-owned oil company, Nigerian National Petroleum Corp, owns the rest.
A CNPC presence in West Africa would bring economies of scale, technology transfer, and knowledge, to leverage between the two companies, according to analysts.
China International Trust and Investment Corp paid US$1.9 billion last year for Nation's Energy Kazakhstan, whose primary assets are in Kazakhstan. After complaints from Kazakh parliamentarians over the rising mainland influence in the oil industry, Citic sold a 50 per cent stake in Nation's to state-owned KazMunaigas in February.
CNPC bought Petrokazakhstan for US$4.2 billion last year.