Unocal fiasco put aside as offshore giant steps in where Indians feared to tread Oil-hungry CNOOC has bounced back from last year's failed bid for United States firm Unocal Corp with a US$2.26 billion deal for a stake in a Nigerian oil field - the second-largest acquisition by a mainland company in recent years. China's dominant offshore producer said yesterday it had signed an agreement to buy a 45 per cent working interest in an offshore oil and gas project from privately owned Nigerian company South Atlantic Petroleum. The deal, to be funded with internal cash resources, follows close on the heels of PetroChina parent firm China National Petroleum Corp's purchase of PetroKazakhstan for US$4.18 billion just over two months ago. 'This transaction is perfectly aligned with CNOOC's long-term strategy of achieving growth through the exploration and development of offshore fields and achieving geographic diversification of the company's portfolio,' chairman Fu Chengyu said. Chinese oil companies have been aggressively negotiating to invest in overseas oil and gas projects as surging growth has seen the nation's reliance on foreign oil rise to more than 40 per cent after it became a net importer only in 1993. The Nigeria deal comes three weeks after Indian Finance Minister P. Chidambaram was quoted by Indian media as saying that the finance ministry blocked a bid by India's largest oil producer, Oil and Natural Gas Corp, to buy into the project. Indian officials had reportedly cast doubt on the project's financial attractiveness. CNOOC officials yesterday brushed aside such concerns, saying it was a 'world class' project invested in by oil majors including France's Total and Brazil's Petrobas. 'With Total as the project's operator and Petrobas as a partner - both very good with deep-water exploration - CNOOC will learn from industry best practices,' chief financial officer Yang Hua said. CNOOC is keen to acquire foreign expertise to jump-start exploration of China's untapped deepwater resources. Mr Yang confirmed CNOOC participated in the open bidding for the Nigeria project but would not divulge details of the process. CNOOC will have to contribute an additional US$2 billion to develop the Nigeria project, scheduled to come on stream by the end of 2008. Total estimated that the project contains 1.1 billion barrels of oil in four fields, including 600 million barrels in the OML 130 oil area, also known as the Akpo deposit, which will start production first. OML 130 covers about 1,300 sq km in the Niger Delta, with water depths of up to 1,800 metres. The project's peak production would reach 175,000 barrels a day in 2009, Mr Yang said. CNOOC's production averaged 427,414 barrels a day in last year's third quarter. CNOOC's acquisition cost works out to about US$4.60 per barrel. Deutsche Bank head of Asia oil and gas research David Hurd said the price was attractive, given that a PetroChina study indicated that 100 international transactions in the past five years cost US$3.87 to $5.37 per barrel. 'Management is also conservative by not including yet-to-be-contracted gas reserves, which are estimated to amount to 30 per cent of the total reserves,' Mr Hurd said. The acquisition comes 10 days after CNOOC shareholders defeated a plan that would have given its state-owned parent more control over overseas deals. Mr Yang said the proposal was not linked to the latest acquisition.