Angola: Chinese oil companies close to boosting presence in Angolan oil production

13 October 2008

London, United Kingdom, 13 Oct – Chinese oil companies China Petrochemical Corp (Sinopec) and China National Offshore Oil Corp (CNOOC) are ready to strengthen their presence in Angolan oil production, in what will be one of the deals of the year in the oil market.

After over a year of difficult negotiations, the two oil companies came to an agreement with Marathon Oil Corp to buy a 20 percent stake in Bloc 32 on the Angolan coast, for around US$1.8 billion, according to the Wall Street Journal.

Sources close to the deal told the paper that the deal should be closed and officially announced within the next few weeks.

Also vying for a stake in Marathon were the Brazilian Petrobras and Indian ONGC Videsh, the overseas investment arm of Indian state-owned Oil & Natural Gas Corp.

In Brazil the press reported last week that Petrobras had definitely lost the deal.

Dow Jones said that once the terms of the deal were verified, authorization from both governments would still be necessary.
Sinopec is considered the second largest oil producing company in China, and CNOOC the third.

Initially, Marathon was demanding over US$ 2 billion for the stake, but had to lower its demands to more “realistic” terms, according to a source close to the deal quoted by Bloomberg.

Marathon hopes to net between US$ 2 billion and US$ 4 billion between now and next year from the sale of oil assets.

With the sale of 20 percent, Marathon retains a 10 percent stake in Block 32, the same as it holds in Block 31, approved for development by the Angolan government in July.

Block 32 is also owned by Total (operator with 30 percent), Sonangol (20 percent), Exxon Mobil (15 percent) and the Portuguese Petrogal that holds five percent.

In 2007, China represented 28 percent of Angolan foreign sales, 10 percentage points up on the previous year; these oil exports were worth US$ 10,605 million dollars, second only to exports to the US which reached US$ 12,855 million dollars.

Proven Angolan offshore reserves are estimated at 11.4 billion barrels, according to international consultancy, Wood Mackenzie.

Chinese oil companies have also been very active in preparing for the next round of bidding for petroleum blocks, which the Angolan government has set for after the elections.

Onshore blocks in Cabinda (Central Block) and Kwanza (KON11 and KON12) and also one in shallow water (Block 9) will be up for tender.

The state company Sonangol will also receive bids for three deepwater blocks (19, 20 and 21) and others in ultra deep water (46, 47 and 48).
Sinopec is on the list of 39 authorized operators along with BP, Chevron, Eni, Gazprom, Petrobras, Total, ONGC Videsh and Galp Energia.

In 2006, Sinopec bought three stakes in Angolan oil fields, with total proven reserves of 3,200 billion barrels.

With stakes of 27.5 percent, 40 percent and 20 percent in three offshore petroleum blocks which it exploits with Sonangol, the Chinese oil company will have paid close to US$2.4 billion.

The Chinese oil company holds 75 percent in a joint venture, Sonangol Sinopec Internacional.

Sinopec also invested US$1.5 billion to develop its share in the exploration of Block 18 off the Angolan coast which it explores in partnership with European oil company BP.

The five fields which make up the Grande Plutonio oil project, Block 18, some 160km off the coast, should produce nearly 200 thousand barrels per day this year.

In a global investment of US$5 billion, Grande Plutonio has reserves estimated at 644 million barrels and is operated by multinational British Petroleum (BP) in partnership with Sonangol and Sinopec.

The fields are supported by a floating production, storage and offloading vessel (FPSO) 310 metres long and 58 metres wide, with a storage capacity of 1.77 million barrels of oil. (macauhub)