Sinopec Buys Chinas 1st Major Russian Oil Unit From BP Venture

Sinopec Buys Chinas 1st Major Russian Oil Unit From BP Venture

Sinopec, China’s second-biggest oil company, agreed to buy an oil-producing unit of a venture controlled by BP Plc, the Asian nation’s first significant asset in Russia.

The sale of OAO Udmurtneft will be completed in “the near future,” TNK-BP said today in an e-mailed statement. The value of the transaction wasn’t disclosed. The unit is worth some $3 billion, people familiar with the sale said in February. Udmurtneft is pumping 115,000 barrels a day of oil and holds 551 million barrels of proved oil reserves, the statement said today.

Sinopec is seeking to diversify into overseas oil and gas production because government price caps on gasoline and diesel at home mean it can’t pass on rising costs. India and China, facing off over energy assets for a fifth time in six months, were pitted against Russian companies including OAO Russneft, the nation’s fastest-growing oil company.

“China wants to secure oil supplies for its future needs,” said Sebastiaan de Bont, who helps manage 3.5 billion euros in emerging market funds, including Sinopec shares, at Robeco Group in Rotterdam. “In much the same way, Cnooc has attempted to acquire oil assets in the U.S., and it has bought oil and gas stakes in Australia and Indonesia.”

Cnooc Ltd., China’s biggest overseas oil explorer, last year abandoned an attempt to buy Unocal Corp., citing opposition from U.S. lawmakers.

Parent, Unit

State-owned China National Petroleum Corp., parent of Hong Kong-listed PetroChina Co., and Malaysia’s state-owned Petroliam Nasional Bhd didn’t bid for Udmurtneft after conducting preliminary due-diligence on the company’s assets, the people said in February.

China Petrochemical Corp., the wholly state-owned parent of China Petroleum & Chemical Corp., both known as Sinopec, produced about 775,000 barrels a day of crude oil in 2004, according to the company’s Web site. China Petroleum has shares traded in Hong Kong.

The parent last year also took stakes in projects in Sudan and Ecuador, and is in talks to invest in an oil field in Iran.


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