Sinopec made a deal with Addax for $7.3billion
Being the second biggest oil company in China, Sinopec Group decided to buy a oil and gas company, Addax Petroleum Corp at the price of 7.3 billion dollars, which is based in Geneva. This happened in a bid to tap oil reserves in West Africa and the Middle East.
It was the subsidiary company of Sinopec Group, Sinopec International Petroleum Exploration and Production Corp (SIPC), that settled the deal. On June 24th, Sinopec in Beijing claimed that they would pay C$52.80 ($45) per share to buy the corporation, in cash.
They declared that buying this company will help SIPC to reach its goal of thriving in the market of West Africa and Iraq, enhancing its business in the whole world and making its offshore oil and gas assets portfolio more flexible. Besides, Addax Petroleum has great exploration potential, which will contribute to SIPC’s promising future, especially its offshore deepwater exploration projects.
Though Addax is based in Geneva, its shares are sold in Toronto and London. At the end of 2008, this company had 536 million barrels of oil reserves, including the present and the estimated ones, with the mean production of about 140,000 barrels of oil everyday, which means the annual production is 7 millions tons.
Most of Addax’s oil and gas assets are located in West Africa and the Middle East, and the most important ones are in Nigeria. From January to March, as the company said, it produced 134,730 barrels of oil per day. At least 75% of its production was from the assets in Nigeria.
Before the day Addax declared that it was taken over by Sinopec, the price of C$52.80 per share is at a 47 percent premium to Addax’s closing share price on June 5. Experts said that Sinopec’s purchase was “wise”, because the oil and gas assets had been reducing in value, due to the worldwide economic recession.
According to Lin Baoqiang, director of the China Center for Energy Economics Research of Xiamen University, it is good time for Chinese oil companies to make overseas investment for the current low price. The price of crude oil has declined more than 50 percent comparing with the $147 per barrel of last July.
Analysts said this deal indicates that the largest refiner in Asia, Sinopec is to further expand its upstream assets abroad. Han Xiaoping, energy analyst with Beijing Falcon Pioneer Technology Co. said that Sinopec’s deal also conforms to the government’s energy strategy to diversify China’s energy supplies.
As China’s imported oil accounts for nearly half of the total oil consumption, specialists have called for a diversified source of oil importing to search for more sustainable supplies.
In recent years, Sinopec, China National Petroleum Corp (CNPC) and China National Offshore Oil Corp (CNOOC), China’s three major oil companies, have all speeded up their overseas expansion.
It is reported that China’s largest oil producer, CNPC, is negotiating with Mongolia this month about exploration and production opportunities. According to Bloomberg News’s interview of Galsan Batsukh, Mongolia’s ambassador to China, the talks will cover investing on a refinery as well as transportation and storage facilities. He said a pipeline from Mongolia to the bordering Chinese province of Inner Mongolia is included in the long-term plans.
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