Sinopec in US$4.65b oil sands investment
April 14th, 2010 | Shanghai DailyCHINA Petrochemical Corp, or Sinopec Group, has agreed to pay ConocoPhillips US$4.65 billion for its stake in Syncrude Canada Ltd, which claims to have the world’s largest oil sands project.
In the largest investment by a Chinese company in Canada’s oil sands, Sinopec will acquire a 9.03 percent stake in Syncrude through its subsidiary Sinopec International Petroleum Exploration and Production Co (SIPC), Sinopec said yesterday on its Website.
The deal is Sinopec’s latest investment in Canada’s oil sands area after it bought a 50 percent stake in the undeveloped Northern Lights project. The remaining stake was owned by Total.
“The acquisition is vital for the company to further explore the oil sands business in Canada as well as a significant strategic measure to develop unconventional oil-gas resources,” the statement said.
Zhou Yuqi, general manager of SIPC, said the company believed oil sands will become an important part in Sinopec’s global resources mix.
Syncrude is a mature project which began operating in 1978. At the end of 2009, the total remaining synthetic crude oil amounted to 11.9 billion barrels, of which 5.1 billion barrels were proven or probable resources while the rest were potentially recoverable resources. The project could produce 550,000 barrels per day currently, accounting for 13 percent of Canada’s daily output.
The investment represented a premium of about 20 percent compared to the value implied last week by Canadian Oil Sands Trust’s market worth, debt and cash, Bloomberg News said. It also beat market expectations of a deal worth up to US$4 billion.
“We are pleased that SIPC has recognized the value of this quality asset,” said Jim Mulva, chairman and chief executive officer of ConocoPhillips.
“This is an important step in the US$10 billion divestiture program which we announced last October,” he said.
ConocoPhillips has announced a two-year plan to reduce its debt by US$10 billion and half of the asset sales are expected to be completed this year. The transaction is pending approval by Canadian and Chinese authorities.
By Pan Xiaoyi