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Eric Ng

CNOOC, China's largest offshore oil producer, is close to sealing a deal to buy a controlling stake in an Indonesian oil field from Spanish-Argentinian giant Repsol-YPF for about US$600 million, according to sources.

If completed, the deal would bolster CNOOC's daily crude oil production volume, but the amount would depend on its stake in the oil field. The field, in West Java, has a production volume of about 100,000 barrels per day, or about 36.5 million barrels a year.

One source said the cost of the oil field was expected to be less than US$2 a barrel of oil equivalent (boe).

This compared with the market valuation of CNOOC's oil and gas reserve of about US$4.7 per boe, based on its net proven reserve of 1.75 billion boe at the end of 2000 and the company's market capitalisation of HK$64.89 billion yesterday.

'I think it is a good deal given the price and the relatively low risk of the oil field which is already in production,' the source said.

A CNOOC spokesman yesterday declined to comment.

One source said Repsol-YPF had a 65.5 per cent stake in an oil project in southeast Sumatra, and a 36.7 per cent stake in a project in northwest Java.

CNOOC's only overseas oil and gas property is in Indonesia, where it has a 39.5 per cent interest in a project in the Malacca Strait. The project's daily production averaged 2,462 barrels of oil in 2000, and CNOOC's share of net proven reserves from it was 9.5 million boe.

CNOOC said last month it was targeting a production volume of 110 million boe this year, against 95 million boe planned last year.

It also said that this year's expected volume would rise to as much as 125 million boe if its special investment programme yielded tangible results.

The firm did not elaborate on its potential investment targets, but said it would take advantage of special situations that might result from the oil price environment and restructuring in the industry.

A little more than a week ago, CNOOC chairman Wei Liucheng said the company was close to an overseas oil field acquisition and that it would not be a surprise if a US$600 million deal was struck in a week.

One source said Repsol-YPF last year had been trying to sell the Indonesian field - considered a non-core asset - for 900 million euro (about HK$6.24 billion), but the depressed global economy and oil prices had reduced the selling price.

Repsol-YPF is among Europe's largest oil firms. In 1999, refining and marketing-focused Repsol, of Spain, recorded substantial debt in acquiring exploration and production-focused YPF, of Argentina.



CNOOC close to deal for Indonesian field