Sinopec buys into Chesapeake's Oklahoma assets

BEIJING - The China Petrochemical Corporation (Sinopec) has purchased half of the stakes of the United States' second-largest natural gas developer in its oil and gas assets in Oklahoma.

The oil giant announced Monday that its wholly-owned subsidiary Sinopec International Petroleum Exploration and Production Corporation has signed an agreement with Chesapeake Energy Corporation to buy 50 percent of the latter's shares of an oil and gas reserve in northern Oklahoma.

The acquisition, which will cost Sinopec $1.02 billion for a 425,000-acre (171,991 hectares) limestone oil reserve, represents the largest such share purchased by a Chinese enterprise.

Under the agreement, the two parties will share future exploratory spending for the project based on their holdings, with Chesapeake serving as the operator.

Given the US extremely strict approval system over purchases launched by foreign companies, the 50-percent acquisition marks a huge breakthrough and will give the Chinese company greater say in the assets, sources from Sinopec said.

The move came after the company's previous $2.5 billion purchase of one-third of the Devon Energy Corporation's gas reserves in 2012.

Both reserves are located in Mississippi Basin and will generate a sound synergistic effect, Sinopec said.

The stock price of Chesapeake declined over 30 percent in 2012, as natural gas in the North American market has become much cheaper due to increasing output from US shale gas projects.

Limestone gas, along with shale gas and coalbed methane, is considered to be a source of unconventional gas.