Sinochem agrees on $1b oil deal

Updated: 2012-02-09 10:27

By Zhou Yan (China Daily)

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BEIJING - Sinochem Group, China's fourth-biggest oil producer, has agreed to buy assets in Colombia from the French oil company Total SA for about $1 billion.

The deal is meant to give Sinochem, a State-owned company, a bigger presence in the Latin American market.

Sinochem signed a share purchase and sale agreement in mid- January allowing it to acquire Total's stake in Tepma BV, which has a stake in the Cusiana oil field and in Colombian pipelines, according to a statement on Sinochem's website.

The acquired interest in the Cusiana field will be able to yield about 7,000 barrels of oil equivalent a day. A barrel of oil equivalent is equal roughly to the amount of energy that is released by burning a barrelful of crude oil.

Sinochem said the deal will help it explore and develop existing oil fields and further lay its foundation in Latin America, where the company aims to produce 5 million tons of oil equivalent by the end of 2020.

"Disposing of these mature assets and positions in transportation infrastructures is in line with our ongoing asset optimization strategy," Olivier de Langavant, senior vice-president for strategy business development at Total's exploration and production, was quoted as saying by Dow Jones.

"For Colombia, it will allow us to focus our expertise on exploration assets with higher potential."

Sinochem could not be reached to comment on this article.

Before the proposed deal between Sinochem and Total can go forward, it must be approved by government authorities.

This latest step follows on Sinochem's agreement in January to buy a 10 percent stake in five offshore oil blocks in the Espirito Santo basin in Brazil. The seller in the deal is the Anglo-French oil company Perenco.

Sinochem also brokered a deal last year to buy a 40-percent stake in Brazil's Peregrino offshore oilfield from the Norway-based Statoil. The cost of the acquisition was $3.07 billion, making it the biggest that the company has made abroad.

The share in the oilfield yielded more than 1 million tons of oil and gas for the company in 2011.

Sinochem is smaller than its rivals China National Petroleum Corp and China Petrochemical Corp and does not have the licenses it needs for domestic oil and gas exploration and development. To maintain its growth, it has had to expand abroad.

From 2002 to 2010, Sinochem produced 8.72 million tons of oil and gas. Sinochem's output for 2011 was estimated to be 3.2 million tons. That same year, China National Petroleum Corp produced 106.54 million tons of crude oil.

To catch up, Sinochem set the goal of producing 15 million tons of oil equivalent by the end of 2020. Countries in Latin America, Brazil and Colombia in particular, are expected to play large roles in helping it meet that ambition.