BEIJING - Andes
Petroleum Corporation, a joint venture of Chinese
petroleum companies, has reached an agreement with
Canada-based EnCana Corporation to purchase all of
its shares in subsidiaries that have oil and
pipeline interests in Ecuador, said sources with
China National Petroleum Corporation (CNPC) on
September 15.
According to the agreement,
signed September 13, the Andes Petroleum
Corporation, in which both the CNPC, China's
largest oil producer, and China Petroleum and
Chemical Corporation (Sinopec), China's largest
oil refiner, hold a share, will buy those assets
of EnCana for US$1.42 billion in cash. The sale,
expected to close before the end of this year, is
subject to prior approval by the government of
Ecuador, normal closing conditions and regulatory
approvals.
Based in Calgary, Alberta,
EnCana has been focusing on developing its natural
gas and oil resources in North America and
divesting of its non-core
assets since being formed in early 2002. The net
book value of EnCana's investment in Ecuador is
approximately $1.4 billion. Sinopec has also
participated in the purchase, said the source.
Andes consortium confirms
deal China's top oil companies confirmed
EnCana's sale of its Ecuador assets to a
consortium led by China's top two oil giants. "We
are in the joint-venture for the acquisition [of
EnCana's Ecuador assets], which also includes
Sinopec Corp," Liu Weijiang, CNPC spokesman for
overseas acquisition told China Daily. Liu refused
to give further details. The country's third
largest oil and gas producer, China National
Offshore Oil Corp (CNOOC), was not immediately
available for comment.
Calgary-based
EnCana Corp said on Wednesday in a statement that
it had reached an agreement to sell its shares in
subsidiaries with oil and pipeline interests in
Ecuador to Andes Petroleum for approximately $1.42
billion. The CNPC and Sinopec Corp-led consortium
will acquire five blocks that are able to produce
some 75,200 barrels per day and have proven
reserves of 143 million barrels, as well as a 36%
stake in OCP Pipeline, which is able to pump
450,000 barrels of oil per day, said the EnCana
statement. The sale became effective on July 1,
and is expected to close before the end of this
year, the statement added.
"It [the sale]
is about concentrating our efforts and investment
where we have clear competitive advantages. We
have reached agreements to divest more than US$10
billion in non-core assets," said Gwyn Morgan,
president and CEO of EnCana, one of North
America's largest holders of gas and oil
resources. Also bidding for EnCana's Ecuador
assets was India's Oil & Natural Gas Corp
(ONGC), which was outbid by CNPC in buying
Canadian-registered PetroKazakhstan less than a
month ago, according to a Reuters report.
Industry insiders said the coming together
of China's oil companies in bidding for foreign
assets this time may be drawing on lessons learned
from CNOOC's failed buyout of Unocal last month
amid strong political opposition in the United
States. "The joint venture by the Chinese oil
companies in buying EnCana's Ecuador assets means
considerably fewer risks, compared with CNOOC's
individual deal for Unocal," said a senior
official from PetroOverseas who declined to be
identified.
Liu Gu, a senior analyst with
Guotai Jun'an Securities (Hong Kong) Ltd, said the
deal would not have a great impact on the listed
prices of PetroChina and Sinopec since "the
acquired oil and pipeline assets only make up a
small proportion of their total portfolio". Shares
of EnCana on Wednesday fell 35 Canadian cents
(29.7 US cents) to 58 Canadian dollars (US$49) in
Toronto Stock Exchange.
India's ONGC
pulls out The EnCana sale marked another
setback for the efforts of India's ONGC oil
company to purchase assets abroad, as ONGC was
also involved in the bidding for EnCana, before
withdrawing from the race. ONGC was close to
acquiring EnCana for $1.4 billion, but withdrew
after the Canadian firm declined to give a
guarentee for a particular oil block. EnCana had
purchased 40% equity in Block-15 from US oil
company Occidental, but the Ecuadorian government
had not sanctioned the sale and had threatened to
cancel the license. Sources said ONGC had asked
EnCana to guarentee that the license would not be
cancelled, a condition the Canadian firm refused
to fulfill, leading to the Indian firm's
withdrawal.
