Sinochem may sell stake in oilfield
CHINA’S Sinochem is exploring the sale of its 40-percent stake in Brazil’s Peregrino offshore oilfield, four people familiar with the matter told Reuters, a deal that could see the state-owned conglomerate walk away from what was once touted as a key overseas asset because of historically low oil prices.
The oil-and-chemicals firm agreed to buy the stake from Norway’s Statoil for $3.07 billion (R40.4bn) in 2010 – beating out a raft of Chinese rivals chasing high-quality assets.
The Norwegian giant owns the other 60 percent of Peregrino, the largest heavy oilfield it operates outside its home patch.
But two of the people with knowledge of the matter said Sinochem is moving to sell its largest overseas upstream stake – with capacity to pump 100 000 barrels a day – as it reshapes its assets to reflect oil prices having halved in the past two-and-a-half years. With that in mind, one person said, Sinochem was pitching the sale at a big discount to its purchase price.
“Peregrino has been a success story for Statoil, not just technically but also financially. It provides a lot of value and has a good operator in Statoil,” said Horacio Cuenca, the Rio de Janeiro-based research director for upstream Latin America at energy consultancy Wood Mackenzie.
Second phase
Long-term expectations of oil prices, however, and the capital expenditure required in the next two to three years to develop the second phase of production will determine the value of any potential stake sale, he said.
The process to sell the Brazilian stake is still at an early stage, and a final decision would depend on how the negotiations progress, the people familiar with the matter said. They spoke on condition of anonymity, because they were not authorised to discuss it publicly.
Statoil declined to comment.
In an e-mail reply, Sinochem’s press office said: “The company has been monitoring a large amount of transaction opportunities in the market and is ready to re-adjust and optimise its asset structure at the right time.”
The potential sale comes as oil prices hover in a mid-$50 range, well below the highs of recent years.
The potential sale of the stake in Peregrino – located 85km off Brazil in the Campos basin below about 100 metres of water – comes as oil prices hover in a mid-$50-per-barrel range, well below the highs of recent years. That trend has also prompted other industry players to consider selling once-prized assets.
Earlier this week, Reuters reported that Malaysian state-owned oil and gas firm Petronas is aiming to sell a large minority stake in a local gas project for up to $1 billion (R13.1bn) as it seeks to raise cash and cut development costs.
For its part, Sinochem has seen growth in its key oil-trading business stagnate, with increasing domestic competition from the likes of state oil traders Unipec and Chinaoil, while overseas oil and gas assets have struggled amid the prolonged low oil prices.
“Sinochem is re-adjusting its energy asset structure,” a Beijing-based industry veteran familiar with the company’s strategy said. “As a medium- to small-sized oil producer, exposure to higher-cost assets like deep water has become over-challenging.
“The company sees itself more as an asset manager. This becomes a clearer direction under the new management,” the industry executive said, referring to Sinochem chairman Ning Gaoning, who took over the helm last year.