PetroChina and Cnooc ink deals in Americas

Chinese state oil companies have inked two fresh deals in the Americas, as they continue to expand abroad to meet China’s ravenous energy demand.

PetroChina, China’s largest energy company by oil and gas production, said on Wednesday it would buy stakes in three Peruvian oil and gasfields from Brazilian state oil company Petrobras for $2.6bn.

Hours earlier Cnooc said it was considering building a terminal to export liquefied natural gas from the west coast of Canada.

The PetroChina deal brings its spending on foreign purchases this year to $11.8bn, according to Dealogic, already more than double the total figure for last year. Chinese companies are expanding abroad to secure oil and gas supplies for their rapidly growing domestic economy. The state oil companies also sell some of their foreign production to third parties.

Unusually for oil and gasfields outside Europe and North America, PetroChina will not have to cede majority ownership to a state oil company. It will own two of the three fields outright, and have a 46.2 per cent share in the third. The blocks produce about 16,000 barrels a day of oil and gas.

“[PetroChina] was the obvious buyer and the 100 per cent ownership is clearly attractive,” said Amrita Sen, an analyst at Energy Aspects in London.

Petrobras said the sale was part of Prodesin, a $9.9bn divestment programme the company announced in March to help direct funds towards its exploration of Brazil’s pre-salt reserves, which are the largest discoveries in the Americas for almost four decades, but costly to explore.

De facto fuel subsidies in Brazil have put enormous pressure on the finances of the state-controlled group, forcing Petrobras to sell non-core assets abroad to raise funds for its $237bn five-year investment plan.

Cnooc signed an agreement with the province of British Columbia late on Tuesday to examine the viability of an LNG export plant near Prince Rupert, a port city off the western coast of Canada.

Chinese, Japanese and South Korean companies have been rushing to secure stakes in North American LNG export projects to take advantage of rapidly growing shale gas production, which has pushed Canadian and US prices to a fraction of Asian levels.

Nexen, Cnooc’s wholly owned subsidiary, owns large shale gas assets in British Columbia and analysts said the company would also be able to buy gas for export from other companies with operations in Canada.

However, any export facility would take years to build and face competition from other proposed projects. Thierry Bros, an LNG analyst at Société Générale, said a basic LNG facility with the ability to export 5m tonnes of gas a year, would cost $7.5bn, with pipelines to bring gas to the terminal an additional cost.

“There is a competition in North America between US and Canada to export LNG and the projects which get built will be those that can get gas to Asia at the lowest cost,” he said.