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SCMP Reporter

Indian rival drops out of running
China Petrochemical Corp (Sinopec), the mainland's second-largest oil and gas company, looks set to beat  India's Oil and National Gas Corp in a US$1 billion-plus bid for Canada's Tanganyika Oil, market sources said.
'The Chinese put in a higher bid and ONGC have indicated they won't be raising their offer any higher,' said one of the sources. 'It looks like they've got it.'
Tanganyika says its assets are in Syria and comprise more than 5.5 billion barrels of oil in six underdeveloped fields.
The company's shares trade in both Toronto and Sweden. In Toronto, its shares are up 47.65 per cent this year but took a hit last week amid the overall market volatility. One of the sources said that might slow the close of any deal.
Both China and India are intent on acquiring oil and gas deposits needed to fuel their rapidly growing economies.
ONGC last month beat out Sinopec for control of Russia's Imperial Energy with a US$2.5 billion bid.
'Imperial was a good one to lose. I'd rather get Syria because the political risk is much lower compared to Russia,' said Larry Grace, energy analyst at Kim Eng Securities.
Sinopec and China National Offshore Oil Corp, the mainland's largest offshore oil company, are also facing off against ONGC after they joined forces last month to bid for an Angolan oil and gas asset owned by United States-based Marathon Oil Corp.
The assets, which have also attracted bids from Brazil's Petroleo Brasileiro (Petrobras), had been expected to fetch about US$1.5 billion, sources said.
That deal, however, has stalled as Marathon, the fourth largest energy producer in the US, holds out for the highest price.
'I don't want to say the deal's dead but they are still thinking that oil's still at US$150 a barrel,' said one source.
Oil prices hit an all time high of US$147.27 a barrel on July 11 on growing demand, a weakening dollar and speculation. Prices have steadily fallen since then to about US$100 a barrel.
Sinopec's Hong Kong-listed subsidiary, China Petroleum and Chemical Group,  on September 8 said it was cutting capital expenditure in the second half of this year by 8.2 billion yuan (HK$9.7 billion), suspending some projects and slowing the pace of others after the government controlled pricing of refined oil products and rising prices for raw materials helped push net profit down 73.4 per cent in the first half to 9.339 billion yuan.
That was after the government provided it with 33.4 billion yuan in subsidies to compensate for the strict pricing regime.
'Sinopec is getting throttled and is in a major cash crunch but still, at the parent level, is running and gunning. That's interesting because that means either things aren't that bad or they feel like they just really need to add to the upstream and have to bid on things,' said Mr Grace.
Mainland companies are developing refining business offshore to diversify out of the domestic market.
China National Petroleum Corp is building an about US$1 billion refinery in Syria. The venture will produce 5 million tonnes of refined products a year.



Sinopec takes lead in race for Tanganyika Oil