PetroChina, Sinopec to pay RMB5 bilion a year more for new resources tax in Xinjian

Beijing, May 27th, 2010 - PetroChina and Sinopec, China's largest natural gas producers, will have to pay 5 billion yuan more annually for the new resources tax levied in Xinjiang province, China's largest gas tank.

The tax rate, at 5 percent ad valorem or a levy of 5 percent of the resources price, would force PetroChina and Sinopec to pay an extra of 3.6 billion yuan and 1.4 billion yuan respectively.

A research report from Goldman Sachs predicts that PetroChina and Sinopec's EPS during the 2010 to 2012 period would decrease by 4 percent and 1 to 2 percent respectively if the Xinjiang region imposes the new tax rate strictly. And if the new tax spreads to the whole country, PetroChina and Sinopec would have to see their 2012 EPS decline by 17 percent and 8 percent respectively.

Qiu Xiaofeng, an energy expert, estimates that if the new tax is extended to the whole country, PetroChina will have to pay an additional 20 billion yuan in tax annually. - Xinhua News Agency -

French oil major Total in talks with Sinochem, Sinopec on oil and gas cooperation

Beijing, May 20th, 2010 - French oil giant Total said Tuesday that the company is in talks with Sinochem Group on cooperation of jointly-funded oil service station at some major Chinese cities such as Beijing and Shanghai, foreign media reported.

Dow Jones Newswire quoted Jean Jacques Mosconi, Total's senior vice president, as saying that the company also held talks with China Petroleum and Chemical Corporation (Sinopec) on business opportunities over refinery joint venture in China.

Mosconi made the disclosure in the Global Refining Summit held in Dutch city Rotterdam on Tuesday, saying that the potential oil refining JV might feed on crude oil from the Middle East.
He said the Chinese oil market is large and fast-growing, but the attractiveness might be hurt by the country's strict government control over product oil pricing system.

China has adopted a more market-oriented product oil pricing mechanism since November 2009. But the oil companies still could not adjust the retail product oil price without government approval.

Sinopec, China's largest oil refiner, produced 113.68 million metric tonnes of product oil in 2009, up 5.9 percent year on year. Its total crude oil throughput stood at 182.62 million tonnes in 2009, up 6.7 percent over a year earlier.

Sinochem is one of China's largest chemical players and also a state-owned oil importer. In recent years, the company has also set foot on the oil and gas industry, both in upstream and downstream sector. - Xinhua News Agency

Sinopec to buy stake in Sonangol Sinopec International from parent

May 20th, 2010 - China Petroleum & Chemical Corp, which is Asia's largest oil refiner and is also known as Sinopec, on Tuesday said that it has secured approval from shareholders to acquire a 55% stake in Sonangol Sinopec International from its parent, China Petrochemical Corp, sources reported.

The deal will be Sinopec's first purchase of overseas upstream assets. In March, Sinopec said that it agreed to buy the stake for US$2.46 billion. Sonangol Sinopec International owns a 50% interest in Angolan deep water oil asset Block 18.

The block has two sections, an east section and a west section, and an average water depth of 1,500 meters. The east section started operation in October 2007 and has a production output of 240,000 barrels per day, while the west section is still under development.

Upon the completion of the deal, Sinopec's proven oil reserves will increase by 3.6%, or 102 million barrels, and its daily crude oil output will grow by 8.8%, or 72,520 barrels, the firm said earlier. - China Knowledge

Cnooc seals deal on Iraq oil field

Beijing, May 18th, 2010 - Cnooc Ltd., the Hong Kong-listed unit of China National Offshore Oil Corp. has partnered with the state-run Turkish Petroleum Corp. (TPAO) to win a contract with Iraq to develop the lucrative Missan oil-field in southern Iraq, marking Cnooc's first upstream access to Iraqi oil following its two major rivals, CNPC and Sinopec.

According to Cnooc, the 20-year contract includes an increase of Missan's production capacity to 450,000 barrels per day from the current 100,000 barrels a day within six years. Cnooc has agreed to price every additional barrel of oil produced after capacity rises by 10% at $2.30.

Cnooc will be the operator and hold 63.75% of the interest. TPAO will have 11.25% interest while an Iraqi drilling company will hold the remaining 25%.

Located 350 kilometers southeast from Baghdad, the Missan oil-field complex includes Fakka oil field, Buzurgan oil field and Abu Ghirab oil field. The estimated reserve of the complex is 2.5 billion barrels. The deal is still pending Iraqi government approval.

Cnooc started bidding for the Missan contract in June last year, partnering with Sinochem International Corp. The two companies proposed to increase production to 450,000 barrels a day and charge $21.40 per barrel, exceeding the Iraqi government's $2.30 proposal.

Last summer, the two sides held rounds of negotiations and the companies concluded to sell on the proposed price. However, Sinochem International later decided to withdraw from the deal without explanation. An industry analyst close to the company speculated that Sinochem was concerned with numerous risks associated with the deal.

Last week, Abdul Mahdy al-Ameedi, head of the Iraqi Oil Ministry's Petroleum Contracts and Licensing Directorate, announced that TPAO had joined the consortium with Cnooc.
The other two major Chinese oil companies, CNPC and Sinopec, have also gained a foothold in the Iraqi oil industry.

In November 2008, CNPC and China North Industries Corp. set up a joint venture and signed a 20-year development contract for Al-Ahdab Oilfield.

In June 2009, CNPC and BP jointly won the bid for a 20-year a technical service contract of Rumaila oil field. The companies plan to see a rise in Rumaila's oil production to 2.8 million barrels per day from 1.1 million, charging $2.00 per barrel.

In late 2009, CNPC setup a consortium with Total and Malaysia's Petronas to develop Halfava oil field by charging $1.40 per barrel.

Sinopec made its expansion in Iraq in August 2009, through the $7.24 billion purchase of the Swedish oil firm Addax, which has operations in Iraq. - Caixin Online