China Petroleum and Chemical Corporation (SNP or Sinopec), one of the largest petroleum and petrochemical companies in Asia, has signed a deal with Chevron (CVX) to join the $6 billion-plus Gendalo-Gehem deepwater natural gas project off Indonesia’s East Kalimantan province.
Sinopec will assume an 18% interest in the project, comprising Rapak, Ganal and Makassar Straitdeep-sea blocks. The deal follows CNOOC Ltd.’s (CEO) recent acquisition of Argentine assets from BP plc (BP) for $7.06 billion.
Though the financial terms of the deal have not been revealed, it helps Sinopec to perk up its position. The company has been lagging its domestic peers PetroChina (PTR) and CNOOC in buying overseas gas assets. Low exposure in LNG receiving terminals may be one of the main reasons for its situation as Sinopec is primarily a refiner and has so far been focusing on deals that can reduce its crude import costs.
Chevron had been hunting for a potential partner for this project since the last one year to alleviate the development risk. The project is presently in a preliminary stage as engineering and design works are yet to be carried out. According to Chevron’s 2009 annual report, Gendalo-Gehem aims to produce around 1.1 billion cubic feet of natural gas and 31,000 barrels of condensate.
Chinese oil majors are increasingly showing their interest toward natural gas projects to lessen reliance on coal and oil. For this, they are heavily investing to build infrastructural facilities to funnel foreign gas, including pipelines from Central and Southeast Asia.
Sinopec had acquired the Geneva-based oil and gas explorer Addax Petroleum for $7.5 billion last year given the latter’s significant exposure in deepwater exploration projects. This acquisition and other offshore Indonesian interests are likely to play an important role in Sinopec’s growth and development.
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