China Petrochemical Corp, the parent of listed China Petroleum & Chemical (Sinopec), has clinched a US$2.46 billion deal to buy French oil major Total's 20 per cent stake in an oil field in West Africa, adding to its portfolio of overseas assets worth over US$35 billion.
The purchase is the latest effort by China Petrochemical to enhance China's energy security via overseas expansion.
The deal will provide China Petrochemical "with another opportunity to acquire and develop experience and expertise in deep-water exploration and production," the company said.
The Usan field is 100 kilometres off the southeastern coast of Nigeria. It began commercial production in February this year, according to its operator Total.
A China Petrochemical official said it wants to assume the field's operatorship after the stake purchase, but would first talk with Chevron and ExxonMobil, which both own 30 per cent of the field, and Canada's Nexen which owns 20 per cent.
Total is in the midst of a plan to sell US$15 billion to US$20 billion of assets considered less lucrative to cut debt.
Several years ago, Nigeria's government proposed raising taxes on oil production, prompting opposition from foreign oil firms, who said it would make exploration "uneconomical". The proposed tax has been cut to 50 per cent for onshore and shallow offshore fields from 85 per cent, and to 20 per cent from 50 per cent for deep offshore fields.
Based on Usan's estimated recoverable oil reserves of 537 million barrels and 830 billion cubic feet of gas, CLSA head of Asia oil and gas research Simon Powell estimated the stake purchase to be at US$18.5 a barrel of oil equivalent. He said it is not cheap, but noted the deal will allow China Petrochemical to enhance its deep-water expertise.