CNOOC in talks for oil asset acquisition
(China Daily/Hong Kong Edition)
Updated: 2005-01-07 10:00

Top Chinese offshore oil and gas producer CNOOC is holding talks to buy the Asian assets of a foreign oil company, sources close to the parties said yesterday.

The sources declined to name the company, but industry watchers have said Chinese oil firms are eyeing several foreign oil firms or their assets, including US oil and gas producer Unocal.

CNOOC, which raised US$1 billion from a convertible bond issue last month, is poised to dip into its US$3 billion war chest for an acquisition to boost its production and natural gas business, the sources told Reuters.

"They are looking very seriously at a very big international trade," one source said, adding a deal could materialize as early as April. The foreign company has a "wide portfolio in Asia", a second source said. CNOOC executives were not immediately available for comment. Unocal spokesman Paul Silva said the company does not comment on market speculation.

Unocal operates or participates in exploration and production projects in Thailand, Indonesia, Bangladesh, Myanmar, the Netherlands, Azerbaijan, Congo and Brazil. Its overseas operations registered natural gas production of 965 million cubic feet per day and oil output of 78,900 barrels per day in 2003, its website showed.

Bankers have previously said Royal Dutch/Shell's 34 per cent stake in Australia's top oil firm, Woodside Petroleum was a likely target for CNOOC.

Woodside's exploration chief said on December 1 the company had not been approached over a possible sale of the stake, which is worth US$3.5 billion at current market prices.

CNOOC and bigger domestic rivals PetroChina and Sinopec have been trying to increase their reserves through overseas acquisitions as China's demand for oil soars on rapid economic growth.

CNOOC, which has spent more than US$1 billion buying oil and gas fields in Indonesia and Australia, is also trying to use overseas acquisitions to shake off the image as a poor relation of Sinopec and PetroChina, the second source said.

"They are still sort of the so-called stepsister of Sinopec and PetroChina. They are looking for this deal to really transform them into a 'pari passu', or equal partner," he said.

"They feel they have the kind of international management culture to assimilate a deal like that," he added.

Unocal's international operations in 2003 accounted for 56 per cent of its natural gas production and 49 per cent of its oil production.

The business had an estimated US$1.24 billion in capital expenditure last year, up from US$834 million in 2003. Proved oil and gas reserves stood at 1.175 billion barrels of oil equivalent.

CNOOC, which targeted 2004 output of 140 million to 145 million barrels of oil equivalent, wants to use a major overseas acquisition to cement its position as the king of China's fledgling liquefied natural gas (LNG) market, the first source said.

"They are already the LNG connoisseur of China. They see a clear niche for themselves in the Asian gas market," he said.

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