Asia's biggest refiner gains access to company's Brazilian operations

HONG KONG - China Petrochemical Corp, Asia's biggest refiner, agreed to pay $3.54 billion for a 30 percent stake in the Brazilian unit of Galp Energia SGPS SA, in China's largest overseas energy acquisition this year.

The refiner, also known as Sinopec Group, will subscribe for new shares to be issued by Galp and assume shareholder loans, the Beijing-based company said in a statement on Friday.

This year, Chinese energy companies have bid at least $16 billion for overseas oil and gas assets to expand reserves and supply the world's largest energy consumer. Galp, which has a share in the western hemisphere's biggest oil discovery since 1976, said this year it would seek to raise 2 billion euros ($2.7 billion) through the sale of part of its Brazilian unit.

"Sinopec Group has been looking at upstream assets globally and will continue to invest billions and billions in overseas acquisitions," said Gordon Kwan, Mirae Asset Securities Ltd's head of regional energy research in Hong Kong. "Ultimately, the parent will inject those assets into the listed company when those assets become profitable."

Sinopec Group paid $7.1 billion for Repsol YPF SA's Brazilian unit last year. That was China's largest overseas oil deal since the refiner bought Addax Petroleum Corp for C$8.3 billion ($8.1 billion) in 2009 to gain reserves in Iraq's Kurdistan and West Africa.

China Petroleum & Chemical Corp, the Hong Kong-listed unit of Sinopec Group, rose 3 percent to HK$8.27 ($1.06) as of the midday break, compared with the 1.1 percent gain in the benchmark Hang Seng Index.

Overseas fields

Galp has stakes in four offshore blocks in Brazil's Santos Basin, including Lula, the largest crude discovery in the Americas since Mexico's Cantarell field in 1976. Lula, formerly known as Tupi, holds an estimated 6.5 billion barrels of recoverable oil and equivalents.

Adding in projected capital spending, Sinopec Group's total investment in the Galp unit will be about $5.18 billion in cash, according to the statement. The deal with Portugal's biggest oil company surpasses China Investment Corp's 2.3 billion-euro investment in GDF Suez SA's oil gas production and exploration subsidiary announced last month.

"The acquisition has further expanded Sinopec's overseas oil and gas business operations, which will make major contributions to the company's oil and gas output growth in the 12th and 13th five-year plan periods," Sinopec Group said. The stake purchase is pending approval from the Chinese government.

The company said it may get 21,300 barrels of oil equivalent a day from its share in overseas fields, with peak output expected in 2024 at 112,500 barrels a day.

Marathon Oil

Meanwhile, Sinopec Group may bid for a share in Marathon Oil Corp's Angolan operations, according to two people with knowledge of the asset sale. Companies including BP Plc have invested in deepwater exploration off the Angolan coast, making the country the second-biggest African oil producer after Nigeria.

"Nobody can buy at a discount, and everybody has to pay a premium to buy now," Kwan said. "If you don't want to pay a premium, you can go make your own discovery, but the process is going to take a long time."

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