UPDATE 2-China’s Sinopec buys Occidental’s Argentina assets for $2.5 bln

* To be Sinopec’s first upstream exposure in Argentina

* Deal represents fair price – analyst

* Occidental concessions in Argentina due to expire in 2017

* China average oil demand grew about 13 pct y/y in Oct

(Adds analyst quotes, deal history)

By Jim Bai and Farah Master

BEIJING/HONG KONG Dec 10 (BestGrowthStock) – China Petrochemical Corp, parent of
Sinopec Corp , agreed to buy all of U.S.-based Occidental Petroleum
Corp’s oil and gas assets in Argentina for $2.45 billion, marking the energy
giant’s first foray into the upstream market in the Latin America country.

Sinopec’s move adds to a growing list of outbound deals in the natural
resources sector by state-backed Chinese firms in the past two years as the
world’s most populous nation scrambles to secure resources for its surging

Sinopec — the top refiner in Asia and China’s largest oil firm by sales
— said in a statement on Friday that the takeover was subject to government

Occidental’s Argentina units hold interest in 23 production and
exploration concessions in Santa Cruz, Mendoza and Chubut provinces in
Argentina, the statement said.

As of Dec 31, 2009, the concessions held gross proven reserves plus
probable reserves of 393 million barrels of oil equivalent. Gross production
from 22 producing concessions totaled over 51,000 barrels of oil equivalent
per day in 2009, according to the statement.

“Overall I do think this is a fair price,” Neil Beveridge, analyst at
Sanford C. Bernstein in Hong Kong, said of the deal.

“On a 2p (proved plus probable) reserves basis we think this is around
$6.90 per barrel, which on a (proved) basis is probably slightly higher than
the $9.10 that CNOOC paid for their share in the Pan American company. These
are very mature onshore oil assets so it is a good fit with Sinopec’s core
area of expertise.”

Occidental noted in its 2009 annual report that its concessions in
Argentina expire in 2017, and it was looking to extend the terms of its
concessions in Santa Cruz province.

“However, in the event Occidental is unsuccessful in obtaining these
extensions, Occidental wil reevaluate its operations and investments in the
country, which may result in decreases in future investment capital allocated
to its operations in Argentina and further impairments of its existing
investments,” the company said in its report.

Sinopec spokesman Huang Wensheng said by phone that he was not in China
and did not know whether there were any extension issues.

“If there were such issues, they should have been taken care of.”


Sinopec’s Occidental deal follows a recent string of outbound enery M&A
from China, where average oil demand rose by almost 13 percent year-on-year in
October, Reuters calculations based on official data showed.

The oil giant agreed in October to buy 40 percent of Spanish oil major
Repsol’s Brazilian arm for $7.1 billion, further strengthening resource-hungry
China’s presence in Latin America.

“It continues along the theme of the globalisation of Chinese oil and gas
companies and deepens their interest in Latin America, which I think
strategically is important for China just given the resources in that region,”
Beveridge of Sanford Bernstein said.

China has made $13.3 billion worth of oil and gas deals in Latin America
so far in 2010, up from zero in 2009, according to Thomson Reuters data. It is
the first year since 2005 China has invested in Latin America.

Sinopec Group and offshore specialist CNOOC Ltd CEO.N> have
also been named as eyeing a $7 billion asset sale by Brazilian oil and gas
start-up OGX SA . [ID:nTOE68E058]

And in late November, BP said it had agreed to sell its stake in
Argentina-based oil and gas group Pan American Energy (PAE) to Bridas Corp,
half-owned by CNOOC, for $7 billion, as it raises cash to pay for the Gulf oil

Bridas was owned entirely by the family of Argentine tycoon Carlos
Bulgheroni until CNOOC agreed to buy a 50 percent stake for $3.1 billion in
(Additional reporting by Tom Miles in BEIJING; Writing by Joseph Chaney;
Editing by Lincoln Feast)

UPDATE 2-China’s Sinopec buys Occidental’s Argentina assets for $2.5 bln