BEIJING - For the
third time in recent months, India's Oil and
Natural Gas Corp lost out to a Chinese firm
in bidding for a Chinese oil asset, when the
China National Offshore Oil Corp (CNOOC) announced
the purchase of a 45% stake in a Nigerian offshore
oil property from South Atlantic Petroleum Ltd
(SAPETRO). According to The Times Online, ONGC's
bid was blocked by the Indian government last
month on "valuation and risk grounds".
ONGC bids had also gone down to Chinese
companies in Kazakhstan - when PetroKazakhstan
went to China's China National Petroleum Corp
(CNPC) - and in Ecuador, when EnCana Corp, a
Canadian-owned firm with assets in the South
American nation, was sold to Andes Petroleum, a
China-controlled consortium.
This
time, the Chinese bidder was CNOOC, which
announced on Monday that its subsidiary had
acquired a 45% stake in a Nigerian offshore block.
Ironically, the sale occurred just as India's oil
minister, Mani Shankar Aiyar, was set to travel to
Beijing to discuss
energy-cooperation ventures between the two Asian
giants. Notwithstanding the most recent incident,
however, there have been successful examples of
China-India energy tie-ups in recent months,
particularly a recent joint effort in Syria (see
India, China pin down $573m Syria
deal, December 22, 2005).
The
Nigerian deal CNOOC announced that its
subsidiary had signed an agreement with SAPETRO to
acquire a 45% stake in Offshore Oil-Mining License
(OML) 130 in Nigeria for US$2.268 billion in cash.
Fu Chengyu, chairman and chief executive
officer of CNOOC, said the purchase will be funded
from the internal resources of the Chinese firm.
Fu said $1.75 billion would go to SAPETRO for the
transaction and the other $518 million would be
paid for the "earlier operation funds". Because
changes in the "operation funds" are still
possible, the bid might still be adjusted,
according to a CNOOC source.
The purchase
of OML 130 was a "rare" opportunity for CNOOC Ltd
(a Hong Kong-incorporated subsidiary of the parent
CNOOC), said Fu. OML 130 is covered by both a
production sharing agreement (PSA) and a
production sharing contract (PSC), each of which
governs a 50% interest in OML 130. SAPETRO is
currently the sole contractor and 100% interest
holder in the PSC. Under the agreement, CNOOC will
acquire a 90% interest in the PSC and hence a 45%
working interest in OML 130.
Located in
Nigeria, one of the world's largest crude-oil
exporters, the Niger Delta region is one of the
world's most prolific oil and gas basins. OML 130
covers an area of about 1,300 square kilometers in
the Niger Delta, and is a deepwater block, with
water depths ranging from about 1,100 to 1,800
meters. OML 130 contains the Akpo field, which was
discovered in 2000, and three other significant
discoveries: Egina, Egina South and Preowei. The
block also contains a range of further exploration
prospects.
According to estimates by
France-based Total, the operator of OML 130,
Akpo's P50 liquid recoverable volumes are about
600 million barrels, with potential for additional
P50 recoverable oil in excess of the 500 million
barrels for the whole OML 130 area. (P50 refers to
an estimate that there is a 50% probability that a
given quantity of oil can be recovered; it should
be understood that reserve volumes are always
estimates, since it is impossible to say with
certainty how much oil can be extracted from a
given field at the commencement of production.)
Akpo is expected to come on stream by the end of
2008 and reach peak production shortly afterward.
Total production is expected to increase sharply
when Egina, Egina South and Preowei come online.
At a price of some $4.60 per barrel oil
equivalent, calculated based on the P50
recoverable volumes of Akpo and other additional
volumes in the OML 130 area, the terms of the
acquisition are also highly attractive when
compared with other recent world-scale upstream
transactions, said Yang Hua, the chief financial
officer of CNOOC Ltd.
The purchase of OML
130 will help CNOOC gain access to an oil and gas
field of huge interest and upside potential,
located in one of the world's largest oil and gas
basins. With one of the leading deepwater experts
as the operator of the field, CNOOC is confident
of the rapid and efficient production of oil, said
Fu Chengyu. He also said this transaction is
aligned with CNOOC's long-term strategy of
achieving growth through the exploration and
development of offshore fields and achieving
geographic diversification of the company's
portfolio.
The transaction is expected to
close in the first half of this year and is
conditional on, among others, Nigerian National
Petroleum Corp and Chinese government approval.
Goldman Sachs (Asia) LLC acted as financial
adviser to the company in connection with this
transaction.
CNOOC Ltd, incorporated in
Hong Kong, is a 70.64%-held subsidiary of China
National Offshore Oil Corp, China's largest
offshore oil producer.
