SINOPEC PAYS $1.2B
China Petroleum & Chemical Corp. (386), Asia's biggest refiner, agreed to pay Russia's OAO Lukoil about $1.2 billion to take control of assets in Kazakhstan.
The Beijing-based company known as Sinopec agreed to buy Lukoil's 50 percent of Caspian Investment Resources Ltd., which holds stakes in four projects in the central Asian nation. Sinopec and its parent already own the other half of the company via a joint venture.
The deal will give Sinopec additional hydrocarbon production of 10.2 million barrels of oil equivalent, as of 2013, Russia's second-largest oil producer said in a statement. The purchase highlights the push by China, the world's biggest energy consumer, to secure diverse energy assets abroad to meet rising demand at home.
"Most Caspian Investment assets are in a period of falling production, while the costs have been growing quickly," Ildar Davletshin, an oil and gas analyst at Renaissance Capital in Moscow, said by e-mail. "It was good for Lukoil to sell the stake to its partner Sinopec, which could offer a more attractive price being a strategic investor."
State-owned Sinopec said in March last year it would form a $3 billion joint venture with its parent China Petrochemical Corp. to replace dwindling overseas reserves with oil and gas assets in Kazakhstan, Colombia and Russia.
"While there has been speculation on reduced interest in M&A by Chinese oil majors given a more uncertain commodity price outlook, this acquisition confirms China's interest in acquiring producing assets at attractive valuation levels," Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., said by phone.
Sinopec's Beijing-based spokesman could not be reached for comment.
The deal is subject to regulatory approval by Kazakh authorities and is expected to be completed before the end of the year, Lukoil said.
Lukoil sold 50 percent of Caspian Investments to a company controlled by India's Lakshmi Mittal and Oil & Natural Gas Corp. for $980 million in 2007. The Chinese joint venture then bought that stake in 2010, after Lukoil waived its right of first refusal.
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REUTERS - Brent crude futures LCOc1 were down 72 cents at $61.49 per barrel at 1020 GMT, having fallen by 1.5 percent on Tuesday, its largest one-day drop in a month. U.S. West Texas Intermediate (WTI) crude CLc1 was at $55.12 per barrel, down 58 cents.
BLOOMBERG - Prices dropped during the session as the International Energy Agency said the recent recovery in oil prices, coupled with milder-than-normal winter weather, is slowing demand growth. The worsening outlook for consumption dampened some of the enthusiasm that OPEC and its allies will extend supply curbs.
Global energy needs rise more slowly than in the past but still expand by 30% between today and 2040. This is the equivalent of adding another China and India to today’s global demand.
Product exports have grown significantly over the past several years and are expected to continue to grow as Russian refineries add capacity to produce more high-quality products.