Sinopec invests $1.5 billion to develop oil and gas resources in the North Sea

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Sinopec Spends $1.5 Billion to Tap Offshore Oil and Gas Resources in the North Sea 2012-12-20 Source: International Petroleum Network Business News, December 20 On December 18, Sinopec completed the acquisition of 49% of the shares in Talisman Energy’s UK subsidiary for around $1.5 billion (approximately 9.4 billion yuan). Sinopec carried out the aforementioned transaction through its wholly-owned subsidiary, Sinopec International Petroleum Exploration and Development Company. The share purchase agreement was signed on July 23, 2012. 　　This is Sinopec’s first foray into oil and gas operations in the North Sea, marking another achievement for the company in the field of offshore oil and gas development. 　　Another success in offshore oil and gas development: $1.5 billion invested in North Sea oil fields. According to public information, Talisman Energy is one of the world’s major independent oil companies; its British subsidiary is headquartered in Aberdeen, UK. It owns 3 key asset areas in the North Sea, as well as 51 oil and gas fields. The remaining recoverable reserves amount to 489 million barrel equivalents, of which 463 million barrels are crude oil, accounting for 95% of that total. In 2011, the daily output of oil and gas equivalent was 71,000 barrels, with an annual output of around 3.5 million tons of oil and gas equivalent. 　　It is understood that the North Sea region in the UK holds an important position in the global oil and gas landscape. To date, the oil and gas production from the UK continental shelf, with the North Sea being the main area, has exceeded 40 billion barrels of oil equivalent. It is estimated that there are still 14 billion to 24 billion barrels of oil equivalent of recoverable oil and gas resources available over the next 30 years. 　　Sinopec stated that this acquisition marks the first time the company has entered the oil and gas business in the UK’s North Sea, and it also represents the first time a Chinese energy company has gotten involved in the investment and development of oil and gas resources in the North Sea. At the same time, this deal was also the largest acquisition globally in 2012 for UK oil and gas assets. 　　In addition, the company possesses strong capabilities for increasing production in mature oil fields, while Talisman Energy has extensive experience in operations in the North Sea. By leveraging their respective strengths, both parties will continue to increase their investments, actively explore the potential of these oil fields, and further expand their asset base to achieve mutual benefit and success. 　　Eyeing offshore oil and gas development: The monopoly held by CNOOC may be broken. In fact, Sinopec has long had an interest in developing offshore oil and gas resources. 　　As early as the beginning of this year, the Ministry of Land and Resources put up for auction two oil and gas exploration blocks in the southern part of the South Yellow Sea Basin, namely Dongyuan in Yancheng and Haidong; CNPC, Sinopec, CNOOC and other companies were invited to participate in the bidding. In the end, Sinopec won the bid for the Haidong block, committing to a total investment of 299.12 million yuan in exploration over a three-year period. 　　This is the first competitive auction for conventional oil and gas exploration rights in our country, and it marks Sinopec’s entry into the field of offshore oil drilling. 　　In recent years, Sinopec has been actively striving to enter the field of offshore oil development and has established its own offshore oil company. 　　“Sinopec did not obtain the right to exploit offshore oil and gas resources until 2009, thereby breaking CNOOC’s monopoly on such exploitation. ”Wan Xuezhi, an energy industry researcher at CIC Consulting, said in an interview with a reporter from the Securities Daily that Sinopec’s advantages in entering offshore oil and gas development lie mainly in its strong financial resources, while its disadvantages are primarily related to a lack of experience in offshore oil exploration and extraction. 　　It is worth noting that in recent years, Sinopec has acquired offshore oil and gas blocks in regions such as Africa and the Middle East through overseas acquisitions, and has relied on partnerships with international oil and gas companies to compensate for its lack of equipment and experience in offshore oil and gas development. 　　In recent years, as China’s onshore oil and gas resources have gradually depleted, it has become increasingly difficult to exploit the remaining fields. In contrast, offshore oil resources are considered an important source for future increases in crude oil production, and this is also the main reason why the two major oil companies, Sinopec and CNPC, are no longer satisfied with merely focusing on onshore oil exploration. 　　Furthermore, Fu Chengyu, who has over 30 years of experience in offshore oil operations, moved from CNOOC to Sinopec; it is only natural that he would lead Sinopec to further expand into offshore oil drilling. 　　Gao Zhikai, a former senior vice president of CNOOC, once said that it is expected that in the future China will allow more oil and gas companies to engage in offshore oil and gas exploration, and that more giants in this field will emerge in China over the next 10–20 years. 　　As Sinopec and CNPC gradually enter the field of offshore oil development, they will also slowly break the monopoly held by CNOOC. 　　The three major oil companies: continuous success in overseas acquisitions. As the year comes to an end, the three major oil companies have seen frequent successes in their overseas acquisitions. 　　First, on December 7, CNOOC’s $15.1 billion acquisition of Nexen was finally approved, bringing to an end this country’s largest overseas acquisition after many challenges. 　　Shortly thereafter, CNPC spent $3.8 billion over three days to acquire two overseas projects. 　　On December 14, CNPC will acquire a 49.9% stake in a shale gas field owned by a Canadian energy company in Alberta for $2.2 billion (approximately 13.7 billion yuan). 　　On December 12, CNPC announced its acquisition of an Australian liquefied natural gas project for $1.63 billion (approximately 10.18 billion yuan). 　　Sinopec also did not want to be left behind, completing on the 18th the acquisition of 49% of the shares in Talisman Energy’s UK subsidiary. 　　If all the aforementioned transactions are completed successfully, the total value of these four overseas acquisitions by the three major oil companies will amount to 20.4 billion dollars. 　　Our country is facing an increasing shortage of energy resources, making it imperative to acquire energy resources overseas. 　　Deng Yong, an analyst at Haitong Securities, believes that as China’s reliance on imported crude oil continues to increase, the three major oil companies will still pursue mergers and acquisitions to acquire overseas oil and gas resources under appropriate conditions in the future. 　　“In the face of an energy shortage, it is necessary to pursue overseas expansion and investment. ”Lin Boqiang, director of the China Energy Economics Research Center at Xiamen University, told a reporter from the Securities Daily that the key lies in being more cautious when selecting resources **and conducting risk assessments. Furthermore, making overseas acquisitions during a global economic downturn represents an opportunity for Chinese companies to buy assets at low prices; moreover, overseas energy acquisitions require consideration of long-term returns. ”