China Sinochem set to buy 1st foreign acquisition

More Reuters, 03.24.03, 4:24 AM ET

SINGAPORE, March 24 (Reuters) - Chinese state oil trader Sinochem is close to finalising its first overseas oil and gas acquisition worth up to $105 million with key gas assets in the United Arab Emirates, a senior Sinochem official said on Monday. Beijing-based Sinochem has agreed to take over Atlantis, a subsidiary of Norwegian oilfield services group Petroleum Geo-Services. "We've completed the first-phase closure of the deal earlier this month -- the legal procedures and the joint account books," said the official from Beijing. Sinochem was waiting for Atlantis' existing partners, including state interests in the UAE and Oman, to decide on their pre-emptive rights before finalising the transfer of the assets, the official said. The deal is Sinochem's first major overseas oil and gas investment although it is one of the smallest among a flurry of acquisitions by state oil companies as China seeks to reduce its dependence on Middle East crude. State firms CNPC, Sinopec, CNOOC Ltd and PetroChina have ploughed more than $4 billion in oil and gas reserves in Indonesia, Australia, Sudan, Kazakhstan, Venezuela and Azerbaijian. The Sinochem official said the centerpiece of the Atlantis deal would be gas assets in the UAE with estimated recoverable reserves of 310 billion cubic feet (bcf). The deal also includes gas exploration contracts in Oman and oil exploration and production contracts in Tunisia. "The final value of the deal, if it's $105 million or some other figure, will depend on what is left after the execution of pre-emptive rights by existing partners," said the official, without giving details. PGS said in late January that it had sold Atlantis to Sinochem for up to $105 million, a sharply lower value than an earlier estimate of over $200 million. PGS did not give the reason for the almost halving of the price. Once China's monopoly oil trader which has since seen its domestic market increasingly squeezed by competition, Sinochem wants to become an independent exploration and production company with a focus on assets outside of China. In early 2002 Sinochem set up a separate arm for exploration and production looking for small and medium-sized oil and gas fields valued at $100-200 million.