China Sinopec to buy $8 billion of parent's assets
BY PRUDENCE HO AND YVONNE LEE
HONG KONG--China Petroleum & Chemical Corp. is in talks to buy $8 billion of upstream oil and gas assets from its state-owned parent, two people familiar with the matter said Wednesday, as part of a plan to increase its footprint in global exploration and production.
China Petroleum & Chemical, or Sinopec Corp., which is listed in Hong Kong and Shanghai, plans to buy upstream assets in countries such as the U.K., Russia, Colombia and Kazakhstan from its parent, China Petrochemical Corp., or Sinopec Group, the people said.
The acquisitions, due to take place in April, are aimed at putting Sinopec on par with integrated global energy majors such as Exxon Mobil, Chevron Corp. and Royal Dutch Shell.
Spearheading the charge is Sinopec Chairman Fu Chengyu, who led a failed bid to buy U.S. oil company Unocal for $18.5 billion in 2005 while at the helm of Cnooc, China's largest offshore oil and gas producer by capacity.
Mr. Fu is on a mission to transform Sinopec into the group's primary international arm. He said last year that Sinopec, which has few overseas oil and gas assets, planned to acquire its parent's overseas upstream assets, partly to limit the damage that China's fuel-price controls have on the company's bottom line.
Under Mr. Fu's leadership, Cnooc developed the greatest international reach of China's top three state-owned oil firms, acquiring oil and gas assets from North America to Nigeria to Iraq. He left Cnooc for Sinopec in 2011.
Sinopec Group holds a 76.28% stake in Sinopec. Since 2010, the group has invested $34 billion in oil and gas deals in the U.K, U.S., Canada, Brazil, Argentina and Australia, according to data provider Dealogic.
The group has said it would ultimately sell all of its upstream oil and gas assets to Sinopec, but it hasn't given a time frame.
Sinopec has started acquiring its parent's overseas assets. In 2010, it bought a 50% stake in Angola's Block 18, a deepwater oil asset, from its parent for $2.46 billion.
Sinopec Group is also planning a $1.5 billion initial public offering in Hong Kong for its Sinopec Engineering this year, two people with direct knowledge of the matter told The Wall Street Journal Tuesday.
Last month, Sinopec Group completed a $1.5 billion acquisition of a 49% stake in U.K. North Sea oil and gas assets owned by Canada's Talisman Energy Inc. as part of efforts to boost overseas production and earnings. In April, it made its first foray into the U.S. shale oil and gas, buying five U.S. assets from Devon Energy Corp. for US$2.44 billion.
In October, Sinopec and Chinese gas pipeline operator ENN Energy Holdings tried to buy ENN rival China Gas Holdings for $2.15 billion. The deal failed to obtain regulatory approval.
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