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China's state-owned oil and gas giant China National Petroleum Corp (CNPC) is stepping up its drive for overseas hydrocarbon assets with a flurry of deals in Latin America, Africa and Central Asia.
Among CNPC’s latest moves is a commitment to take part in Ecuador’s $US12 billion Pacific Refinery project, where state-owned PetroEcuador and its counterpart in neighbouring Venezuela, Petroleos de Venezuela (PDVSA), are the joint venturers.
Ecuador’s Vice-President Jorge Glas announced earlier this month that CNPC will become the third partner in the 300,000 barrel a day refinery project, which is due to begin operating in 2017.
CNPC chairman Zhou Jiping met Glas in Quito last month, and later signed a framework agreement covering construction and financing of the Pacific Refinery as part of CNPC’s plan to scale up its Latin America involvement. CNPC already has invested in two oil projects in Ecuador.
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In Central Asia, CNPC last month agreed to take a one-third share in the production sharing contract for Tajikstan’s Bokhtar block in the Amu Darya Basin, as a partner with France’s Total and Toronto-listed independent oil and gas explorer Tethys Petroleum.
CNPC described the 35,000 square kilometre Bokhtar block as a “world-class asset with enormous potential.”
According to an independent report prepared by US oil industry consultants Gustavson Associates, Bokhtar has gross unrisked mean recoverable prospective resources of 27.5 billion barrels of oil equivalent, made up of 3.22 trillion cubic metres of gas and 8.5 billion barrels of oil.
In neighbouring Kazakhstan, CNPC is expected to become the ultimate owner later this year of an 8.4 per cent stake in the massive $US40 billion Kashagan project in the Caspian Sea area, dashing Indian hopes for a foothold in the project.
Original owner ConocoPhillips announced last November that it would sell the stake for about $US5 billion to ONGC Videsh, the overseas arm of India’s state-owned oil and gas company ONGC. But Kazakhstan’s state-owned energy company KazMunaiGas (KMG) elected to use its pre-emptive right to buy the stake at the beginning of this month.
The expectation is that KMG, which already holds 16.81 per cent, will in turn sell the 8.4 per cent to CNPC, preferring to have a Chinese oil company over an Indian one in the Kashagan consortium. Other participants in the consortium, known as the North Caspian Operating Co (NCOC), with KMG are ExxonMobil, Shell, Total, Italy’s Eni and Japan’s Inpex.
According to the NCOC, the Kashagan field contains 9 billion to 13 billion barrels of recoverable oil, and it is regarded as one of the best finds of the last 20 years. Initial output will be 180,000 barrels a day in 2013-14, rising to 370,000 barrels a day in a second-stage development later this decade.
In another major development for CNPC last month, company chairman Zhou Jiping signed key agreements with Russian energy companies Rosneft and Novatek, respectively covering increased oil deliveries from Rosneft and a 20 per cent stake in Novatek’s Yamal LNG project in western Siberia.
Under the 25-year Rosneft agreement, the Russian state-owned oil producer will lift crude deliveries to CNPC via the Russia-China crude oil pipeline (the Eastern Line) from 15 million tonnes a year now to 30 million tonnes by 2018. Under a separate five-year extendable contract, Rosneft will deliver 7 million tonnes a year via the Kazakhstan-China crude pipeline (the Western Line) from next January. Rosneft will also deliver 9.1 million tonnes of crude a year to the proposed Rosneft-CNPC joint venture refinery in Tianjin once it is operating.
Construction of the refinery may start next year. These deals will lift CNPC’s crude imports from Russia to 46.1 million tonnes a year.
Under the agreement with Novatek, CNPC is buying a 20 per cent stake in the Yamal LNG project, joining Total as a foreign stakeholder in what is shaping as one of the most challenging but potentially rewarding plays in Russia’s Arctic gas fields. CNPC will take at least 3 million tonnes a year of Yamal LNG, with first gas shipments possible in 2016. It also has agreed to help Novatek source financing for the $US20 billion project.
In Africa, CNPC has struck recent deals covering energy projects in Niger and Mozambique. The latest was in April, when CNPC agreed to partner with Taiwan’s CPC Corp to explore for oil in the Agadem block in the eastern part of the country. CNPC already is helping Niger develop the Agadem oil area.
In March, CNPC agreed to pay about $US4.2 billion for a 20 per cent stake in Eni’s Mozambique offshore gas project known as Area 4, part of the wider Rovuma gas field.
Another Chinese state-owned oil and gas entity, China Petrochemical Corp. (Sinopec), said late last month it would pay about $US1.5 billion to buy US-based Marathon Oil’s 10 per cent stake in an Angolan offshore field known as Block 31. The field is operated by BP.
In other notable deals at the end of 2012, CNPC agreed in December to pay $US1.63 billion to BHP Billiton for stakes of 8.33 per cent and 20 per cent respectively in the East and West Browse gas projects offshore from Western Australia, or about 10 per cent of the total.
Two days later in Canada, CNPC said it would pay $US2.2 billion, including $US1 billion on development costs, for a 49.9 per cent share in a shale gas project that Canadian company Encana is developing in northern British Columbia.