Sinochem to look for oil in deep waters

Updated: 2012-01-05 08:00

By Zhou Yan (China Daily)

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Sinochem to look for oil in deep waters

BEIJING - Sinochem Group, the country's fourth biggest oil company, recently inked a deal to acquire a 10 percent stake in a deepwater exploration project off the shores of Brazil, an official from the company said.

Sinochem said it hopes the deal will give it technological and management expertise in the business of exploring for oil and gas in deep waters. The company disclosed no further information about the acquisition.

The purchase came after the State-owned oil company first entered the Latin American country in May. It then obtained a 40-percent stake in Brazil's Peregrino offshore oilfield from the Norway-based Statoil for $3.07 billion, marking the company's biggest overseas acquisition so far.

That project is estimated to have produced 3.2 million tons of oil and gas for Sinochem last year, according to an official from the company who declined to be identified.

From 2002 to 2010, the amount of Sinochem's gas and oil output was 8.72 million tons.

The official said the company is expected to produce more than 4 million tons of those fuels next year. That increase is to partly come from an increase in output from two blocks in Brazil's Peregrino oilfield, which is in the Campo Basin.

The blocks are expected to yield more than 1 million tons of gas and oil this year.

Sinochem entered into the business of exploring for oil and gas in 2002 and now operates 25 blocks in 10 countries, including Brazil, Colombia, Peru and the United Arab Emirates.

That business now contributes 10 percent of Sinochem's profits, the official said. The energy conglomerate made 7.35 billion yuan ($1.17 billion) in net profit in 2010.

Unlike China's three largest oil companies - China National Petroleum Corp, China Petrochemical Corp and China National Offshore Oil Corp - Sinochem does not have the licenses it needs to explore domestic oilfields and has to expand overseas to maintain its growth.

"We're looking for acquisition opportunities in foreign markets, but we're very cautious and careful about making final decisions," the official said.

The Beijing-based energy conglomerate also said it is willing to take part in the second auction that will be held for the rights to explore for shale gas in China, an event that is being organized by the Ministry of Land and Resources.

The auction will enable Sinochem to further test the commercial opportunities entailed in the production of alternative fuel in China.

Sinochem was not short listed to bid in the first shale gas auction, which was held in June.

Sinochem gained a 24.5 percent non-operating interest in the Zhaodong oil block in Bohai Bay by purchasing a 100-percent stake in New XCL-China LLC in February 2007. That marked the company's first and only foray into domestic oil exploration.