CNPC and KazMunaiGaz seal $ 2.6 bn deal

Nov 25, 2009 01:00 AM

China National Petroleum Corp. (CNPC) has finalized a $ 2.6 bn (EUR 1.74 bn) deal with Kazakhstan's state energy company to jointly buy the Central Asian country's fourth-largest oil producer, Kazakhstan's KazMunaiGaz said.
The companies bought MangistauMunaiGaz, which controls oil reserves estimated at around 500 mm barrels, through an investment venture owned by KazMunaiGaz and CNPC with funds largely provided by the state-owned Export-Import Bank of China.

CNPC's acquisition of a 50 % stake in the Kazakh-based company is the latest success in a global energy asset buying spree by Chinese companies. It further consolidates the Asian giant's interests in the energy-rich region. MangistauMunaiGaz produces 110,000 barrels of oil daily.
The purchase of MangistauMunaiGaz from British Virgin Islands-registered Central Asia Petroleum was due for completion in July, but was reportedly delayed due to issues relating to the oil company's outstanding tax liabilities. CNPC and KazMunaiGaz initially agreed the joint purchase of MangistauMunaiGaz as part of larger deal for China to lend Kazakhstan $ 10 bn.

China is undertaking a long-term project to bolster its energy security by sealing deals with neighbouring states, including Kazakhstan, and reduce its reliance on maritime oil transportation routes. Earlier this year, China's sovereign wealth fund announced that it had paid $ 949 mm for an 11 % stake in KazMunaiGaz subsidiary, JSC KazMunaiGaz Exploration Production.
In February, China signed a long-term oil supply contract and pipeline deal with Russia worth $ 25 bn. Days later, Brazil agreed to supply up to 100 mm barrels of crude oil a day to China in exchange for a loan of up to $ 10 bn. That same month, Venezuela and China struck a deal to put an additional $ 6 bn into a fund used finance joint development projects in areas including oil production.

CNPC has been operating in Kazakhstan for several years and is the largest Chinese energy company in the country. It bought Canadian-run oil producer PetroKazakhstan for $ 4.18 bn in 2005, the largest foreign purchase by a Chinese company at the time. A 33 % stake in PetroKazakhstan was sold to KazMunaiGaz in July 2006 amid pressure from the Kazakh government for greater national ownership of the energy sector.
In 2008, China imported 6 mm tons of oil through the Kazakhstan-China oil pipeline, a 26 % increase on the previous year. Russia also uses the route, which is jointly managed by CNPC and KazMunaiGaz, to transport its oil exports to China.

Kazakhstan is eager to diversify its oil export routes, most of which currently go to Western buyers across Russian territory.

Source / The Associated Press
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