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  • Sinopec moves into Kurdish region

    Sinopec Pact For Addax Boosts China's Buying Binge

    Sinopec Pact For Addax Boosts China's Buying Binge - WSJ.com

    By GUY CHAZAN and SHAI OSTER

    China again sought to satisfy its hunger for natural resources, as state-owned Sinopec Group agreed to acquire oil-exploration company Addax Petroleum Corp. for 8.27 billion Canadian dollars (US$7.19 billion), in what would mark the largest overseas takeover by a Chinese company.

    The deal increases Sinopec's presence in one of the world's hottest oil-exploration frontiers -- offshore West Africa -- and establishes it in oil-rich but politically sensitive Iraqi Kurdistan.

    The transaction also underscores the growing appetite for risk among Chinese resource companies. For years, they tended to tread cautiously, especially after U.S. political pressure forced Cnooc Ltd. to abandon its $18.5 billion bid for oil producer Unocal Corp. in 2005.
    More



    But in the past year, Chinese state-owned companies have been encouraged to make acquisitions by a central government convinced that the global financial crisis has created an unmatched buying opportunity.

    They are taking advantage of depressed asset prices and access to Chinese credit to strike deals designed to secure the resources needed to power China's growing economy.

    The purchase also demonstrates growing confidence among Chinese energy companies. In the past, they have preferred to strike government-to-government deals and offer loans for oil. Over the past half-year, China has proffered more than $45 billion in loans to Russia, Brazil, Venezuela and Kazakhstan in exchange for long-term crude supplies.

    But deals like the Addax acquisition show they are gradually growing into international oil companies, capable of striking high-profile, cross-border deals. They are even expanding into countries, such as Syria, deemed too risky by Western oil companies.
    [Sinopec photo and charts]

    But not all of China's efforts have been successful. In early June, Anglo-Australian mining giant Rio Tinto Ltd. rejected Aluminum Corp. of China's $19.5 billion offer for part of the company after recovering markets made the deal financially unpalatable. That deal also faced economic, political and shareholder opposition, reflecting fears over the consequences of giving China direct access to big supplies of natural resources.

    The Addax deal also marks the first time a global oil giant has ventured into the Kurdish autonomous region of northern Iraq. Authorities in Baghdad have denounced as illegal the roughly 30 oil contracts negotiated between the Kurdish regional government and foreign energy companies like Addax. Western oil majors have steered clear of Kurdistan for fear of antagonizing the Iraqi government.

    Sinopec's foray into the region suggests the tide might be turning. Earlier this year, Iraqi Oil Minister Hussain al-Shahristani gave approval for foreign companies developing oil fields in the Kurdish region to export their crude directly to international markets. Addax was a beneficiary of the change and has been shipping oil since the start of this month.


    Still unclear, however, is how foreign companies will be compensated for the oil they export, with most sales revenues being channeled to Baghdad.

    "The Sinopec deal shows the big boys are now more confident about investing in Kurdistan," said Helmut Langanger, head of exploration and production at OMV AG, the Austrian energy firm that is also drilling for oil in the Kurdish region. OMV says its presence in the north disqualified it from participating in Iraq's first oil-licensing round, scheduled for next week.

    "The Chinese must feel comfortable that they can manage this, otherwise they would never have announced it," said one person familiar with the deal.

    Based in Switzerland and listed in London and Toronto, Addax is one of the largest independent oil producers in West Africa and the Middle East by volume. Aside from Kurdistan, it operates off Nigeria, an area that has seen huge exploration success in recent years.

    The company produced 136,500 barrels a day on average last year, or about 1.7% of China's daily consumption. China used about eight million barrels daily last year, according to the BP Statistical Review of World Energy.

    The deal is a coup for Addax Chief Executive Jean Claude Gandur, one of the founders and principal shareholders in the company. He is a Swiss citizen who grew up in the Egyptian city of Alexandria and started out as an oil trader in the 1970s.

    He set up his own West African trading operation, Addax & Oryx Group, in 1987 and later began acquiring stakes in oil fields while gaining a reputation as a buccaneer who thrived in tough, politically risky settings.

    In 1994, he hived off Addax's oil-exploration and development business into a separate company, Addax Petroleum, and listed it on the Toronto Stock Exchange 12 years later.

    Sinopec offered C$52.80 a share, 16% more than Tuesday's closing price in Toronto. In a statement, Addax said its board recommended that shareholders accept the offer and said senior executives, including Mr. Gandur, have agreed to sell their combined 38% stake to Sinopec.

    Sinopec called the acquisition "a transformational transaction" that would accelerate its international growth.
    —Gina Chon contributed to this article.

    Write to Guy Chazan at [email protected] and Shai Oster at [email protected]
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

  • #2
    Kurds May Get Their Way With Sinopec

    Kurds May Get Their Way With Sinopec - WSJ.com

    By LIAM DENNING

    A maxim of the high-risk energy business is "you don't drill for oil in Switzerland." But you can buy oil companies based there.

    Addax Petroleum, with an office in Geneva but reserves spread among Nigeria, Gabon and Iraq, is selling itself to China Petrochemical Corp., or Sinopec, for $8.8 billion, including net debt.

    Sinopec is paying about $16 a barrel of proven and probable reserves. The average for African and Middle Eastern deals in 2008 -- a year with triple-digit crude prices -- was under $5 a barrel, according to consultants IHS Herold and Harrison Lovegrove & Co.
    [Addax Petroleum]

    Throw in Addax's possible reserves and contingent natural-gas reserves and the multiple drops to just over $7 a barrel of oil equivalent. Your average buyer would never factor in such rosy assumptions. But then Sinopec, 66%-owned by the Chinese government, isn't your average buyer. Besides slaking Beijing's thirst for oil, Sinopec must be hoping to gain cachet by landing a large foreign transaction while other recent attempts, such as Aluminum Corp. of China's deal with miner Rio Tinto, have failed.

    One potential wrinkle is Baghdad, which still has no official agreement with Kurdish authorities on managing the region's oil. The Iraqi government might take offense at Sinopec's move and block access to bigger projects elsewhere in the country.

    Then again, would cash-strapped Baghdad really confront a major oil consumer ready to pay top dollar for reserves? Even if it did, Addax's Kurdish assets represent just a fifth of its proven and probable reserves. For the sake of expediency, Sinopec could potentially split them off to appease Baghdad and still gain Africa's riches.

    Write to Liam Denning at [email protected]
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

    Comment


    • #3
      nice read , even tho' i got to read it pretty late :)
      any idea where i can find the names and emails for the ones from Addax and Sinopec in charge in Kurdistan ?
      TIA a
      Last edited by al_TernirGroup; 09 Dec 09,, 12:32.

      Comment


      • #4
        sorry I don't have them.



        * Chinese state oil firm CNPC bids aggressively for Iraq oil

        CORRECTED - Chinese daring wins another chunk of Iraq oil | Reuters

        * Willingness to take risks, cheaper labour, a factor

        (Corrects typo in spelling of Alkadiri, fifth paragraph)

        By Mohammed Abbas

        BAGHDAD, Dec 11 (Reuters) - Chinese state oil firm CNPC won the right to develop yet another lucrative Iraqi oilfield on Friday, as the Asian powerhouse's need to secure future energy supplies drove it to make aggressive bids for contracts.

        Cheap labour costs and a willingness to take more risks than their Western counterparts have given Chinese state energy firms the edge in their hunt for fuel to feed China's booming economy.

        A CNPC-led group of oil firms bid successfully on Friday to develop Iraq's Halfaya oilfield, in Iraq's second oilfield auction since the 2003 U.S. invasion. [ID:nGEE5BA07E]

        The contract is the third big deal CNPC has secured in Iraq. It was the first to sign a major oil deal since the war with a contract for the Ahdab oilfield. In June, it formed part of a BP-led (BP.L) consortium that won the only contract awarded at the first round to develop the supergiant Rumaila field.

        "It's a reality that the Chinese have bid very aggressively for Iraq oil acreage. It's a very transparent, open bidding process and the Chinese have taken advantage of it. They have been very aggressive and willing to agree lower fees than others might have," said Raad Alkadiri, head of global risk at Washington-based consultancy PFC Energy.

        CNPC or other state-owned Chinese energy firms either led or were part of consortiums that made all the bids at the June auction.

        In Friday's second round, CNPC was also partnered with France's Total (TOTF.PA) in an unsuccessful bid for the supergiant Majnoon oilfield, while Chinese state energy firm CNOOC was part of a failed bid for Halfaya.

        The contracts on offer are 20-year service deals which pay a remuneration fee per barrel. Not including Ahdab, the fields for which deals were awarded in which CNPC has a stake have total estimated reserves of about 21 billion barrels.

        MORE RISK, CHEAPER COSTS

        CNPC secured the Ahdab deal last year, reviving a Saddam Hussein-era contract after a year of talks and getting ahead of Western oil firms jittery about entering a country still plagued by bombings and legal uncertainties.

        "It's true that they have been willing in many parts of the world to take risks," said John Mitchell, an energy and oil industry analyst at Chatham House.

        Chinese state firms have in recent years been aggressively pursuing deals in Africa, South America and elsewhere, including countries Western firms find it difficult to operate in.

        "Western firms are particularly concerned about the security of their employees and exposure to litigation in their home countries if they don't take proper care of them ... Perhaps Chinese companies are not so sensitive to those issues," Mitchell added.

        China's state companies are also backed by a government with deep pockets and a huge pool of cheap labour, making them an attractive partner for Western oil firms looking to reduce risks and costs whilst also getting a foothold in frontier projects.

        "We've seen the Western companies partner with CNPC to not get outbid and to help them get cheaper equipment and workforce," said Samuel Ciszuk, Middle East energy analyst at IHS Global Insight.

        Chinese firms, in turn, get the partners needed to handle the huge fields on offer in Iraq, home of the world's third largest oil reserves, and perhaps benefit from Western knowhow and equipment, analysts say.

        In any case, Iraq has indicated it prefers consortiums to bid for its fields, so a Chinese-only venture may not have been looked at quite as favourably. (Additional reporting by Simon Webb; editing by James Jukwey and Anthony Barker)
        “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

        Comment


        • #5
          Shell and Petronas (Malaysia) got another Iraq oil contract.

          But so far, no American oil companies. Perhaps they fear to tread in.

          This is from the first day of a 2-day round of bidding.
          Last edited by Merlin; 12 Dec 09,, 03:08.

          Comment


          • #6
            On the 2nd day of bidding, again none of the companies winning the contract is American.

            This time the main partners of the winning bid are Russian and Norwegian oil companies.
            Last edited by Merlin; 13 Dec 09,, 02:01.

            Comment


            • #7
              U.S. loses out on Iraqi oil contracts
              December 27, 2009 10:27 AM
              REALITY CHECK, by CAROL JENSEN

              It was a bit of a shock when earlier this month the United States failed to secure even a single deal in the auction of the second round of contract bids, which will shape the Iraqi oil industry for many years to come.

              It couldn’t help but be noticed that “Two of the most lucrative of the multi-billion dollar oil contracts went to two countries which bitterly opposed the U.S. invasion — Russia and China — while even Total Oil of France, which led the charge to deny international approval for the war at the U.N. Security Council in 2003, won a bigger stake than the Americans in the most recent auction,” Time magazine reported.

              The bids were supervised by the Iraqi Oil Ministry and not overseen by the U.S., as was probably the initial intention when the plans to invade Iraq and take control of their oil was first dreamed up by the neocons. What they failed to understand was that the Iraqi people do not feel that they owe us anything after their country was virtually destroyed in a vain search for the elusive weapons of mass destruction.

              Oil billionaire T. Boone Pickens expressed his annoyance at the fact that U.S. oil corporations were being forced to compete with foreign companies for Iraqi oil contracts: “They’re opening them up to other companies all over the world ... we’re entitled to it,” Pickens insisted, warning that after six years of American occupation, “we leave there with the Chinese getting the oil,” Pickens was quoted in the Financial Times. It can only be assumed that Mr. Pickens speaks for the majority of those known as American big oil.

              Speculation is that the Iraqi government under Nouri al-Maliki is showing its displeasure at the United States for six and a half years of invading, occupying, destroying and then rebuilding of his country, by not giving into what can only be described as American designs on Iraqi oil. Another perspective might be that it proves that the U.S. failed to accomplish one of its main goals of gaining control or at least influence over Iraqi oil reserves for the foreseeable future.

              The Iraqi government made it clear that they would not award oil contracts based on outside political considerations, but rather on prices and on production targets. It seems obvious from the outcome of the awards that the U.S. companies may not have been financially able to compete on either front with the foreign bidders, particularly China.

              It is somewhat ironic that prior to the U.S. invasion in 2003, Russian and Chinese companies were the dominant contractors for the “black gold” of the Iraqi desert, and now they have beaten out American bidders, although to some American companies it may seem more like a slap in the face than irony.

              I’m sure that going into the Iraqi invasion, even in its early planning stages prior to 9/11, the Cheney-Rumsfeld big-picture never looked quite the way that it does today. None of them could have imagined way back then that the United States would ever lose out to China and Russia for Iraqi oil deals. It would just have been totally unthinkable.

              The other fly in the ointment for the U.S. when it comes to access to the oil fields in southern Iraq is Iran, and its control of the port city of Basra. According to an article in The Atlantic, “Basra and its surrounding area are not really part of Iraq anymore.” Iran has in effect taken over one-third of Iraq and it is being controlled by Iranian-backed political parties, Da ‘Wa and other Shia groups all under the control of Tehran. So the fact that Basra provides the only maritime access and is the main oil export route in the country, it has become a huge problem for the United States. It is something that former- leader Saddam Hussein would never have allowed to happen.

              An Iranian-allied faction is in charge of Iraq’s oil exports and has a direct role in “reviewing lists of foreign companies bidding on Iraq’s mega oil fields in the south. In other words, you can’t do business in southern Iraq without a green light from Tehran. And no one even bothers to hide Iran’s role,” The Atlantic reported last week.

              It was just a few months back that Russia and China protected Iran from U.N. sanctions that would have destroyed their economy. So the fact that those two countries are the big winners for the Iraqi oil contracts should not be that surprising. You might say that all is fair when it comes to a love of oil and money, or at least that is the case in Iraq these days.

              Comment


              • #8
                Does anyone know where the Kurds' negotiations with the Central Govt. stand? I was told they still hadn't struck a deal.

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