China Petroleum & Chemical Corp, Asia’s biggest refiner, agreed to buy ConocoPhillips’s stake in oil-sands producer Syncrude Canada Ltd for $4.65 billion to help feed the world’s fastest-growing major economy.
Sinopec, as the Beijing-based company is known, will buy about 9 per cent of unlisted Syncrude, Houston-based ConocoPhillips said today in a statement.
Spending by Chinese companies on mining and energy acquisitions reached a record $32 billion last year. ConocoPhillips said in October it planned to sell $10 billion of assets over two years to help cut debt. Sinopec joins domestic rival PetroChina Co in acquiring stakes in Canadian producers of oil locked in sand.
“China is moving more and more and more toward wanting to and having a desire to secure natural resources,” said Robbert Van Batenburg, head of equity research at Louis Capital Markets LP in New York. “For them to get a greenfield operation in the oil sands in Canada is going to be much more difficult, so this is probably the most viable.”
Oil sands are deposits of bitumen, an extra-heavy oil that must be treated for use in refineries to produce gasoline and diesel fuels.
State-controlled PetroChina won approval from the Canadian government in December to buy a stake in Athabasca Oil Sands Corp’s MacKay and Dover oil-sands projects for C$1.9 billion ($1.9 billion).
China Petrochemical Corp, Sinopec’s parent, bought Calgary-based Addax Petroleum Corp for C$8.3 billion last year to add oil reserves. Sinopec said on March 29 it will pay $2.5 billion to buy a stake in an Angolan field from its parent to boost crude-oil production.
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The Chinese economy grew 10.7 per cent in the fourth quarter, the fastest pace since 2007, and is forecast by the United Nations to advance about four times more quickly than the US this year.
China, the world’s largest energy consumer behind the US, relied on imports to meet more than half of its oil needs last year. The country’s dependency on imported crude will continue to rise, PetroChina Chairman Jiang Jiemin said last month.
Annual domestic oil production is unlikely to exceed 200 million tons by 2020 while demand may increase to about 600 million tons by then, according to Jiang.
Debt at ConocoPhillips, the third-largest US oil company, ballooned after Chief Executive Officer Jim Mulva agreed to buy Burlington Resources Inc. in December 2005, the day before gas prices hit a record at $15.78 per million British thermal units. The deal closed for a purchase price of $36 billion in 2006.
Mulva said in March that he expects half of the company’s planned $10 billion in asset sales to be done this year. ConocoPhillips said the sale of the Syncrude stake, which requires Canadian and Chinese government approvals, is expected to close in the third quarter.
Canadian Oil Sands Trust is the lead partner in Fort McMurray, Alberta-based Syncrude with a 36.7 per cent interest. Other partners in the venture include Imperial Oil Ltd, Suncor Energy Inc., Murphy Oil Corp, Nexen Inc and Nippon Oil Corp’s Mocal Energy Ltd.
ConocoPhillips, which was advised by Credit Suisse Group AG, rose 66 cents, or 1.2 per cent, to $55.98 at 12:39 pm in New York Stock Exchange composite trading. Osler, Hoskin and Harcourt served as legal counsel. American depositary receipts of Sinopec, which was advised by Deutsche Bank AG, dropped 99 cents, or 1.2 per cent, to $84.87.
Exxon Mobil Corp, based in Irving, Texas, and Chevron Corp, based in San Ramon, California, are the largest US oil companies.