China Petroleum and Chemical Corp. or Sinopec (SNP) recently announced that it would sell a 40% interest in an offshore oil and gas exploration block in Australian waters to CPC Corp., Taiwan. Sinopec will conduct the deal through its wholly owned subsidiary Sinopec International Petroleum Exploration and Production Corp. (SIPC).
The exploration block is located in Bonaparte Basin, 300 kilometers north of the Australian city of Darwin. It covers 4,715 square kilometers and is estimated to have a natural gas reserve of 13 trillion cubic feet.
The deal is part of the cooperative Australian venture between SIPC and CPC Corp. Focusing on overseas oil exploration and production on behalf of its parent company, SIPC had won a bid for a stake in this block in 2008. The two companies negotiated an interest transfer recently and have reached a consensus.
Natural gas is expected to be a key growth area for Sinopec. Its steadily growing natural gas volumes, investments in transportation and natural gas assets as well as the Chinese Government’s supportive policies offer attractive long-term growth prospects. While the company sold 40% stake in this natural gas reserve, we suspect that it is merely for an interest transfer negotiation.
China’s impressive economic growth has significantly increased demand for natural gas. This growth momentum presents attractive opportunities for industry players that can meet the country’s fast-growing energy needs. Being one of the two Chinese integrated oil companies, Sinopec is well positioned to capitalize on these favorable trends.
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