HONG KONG: Shares of China Petroleum & Chemical Corp (Sinopec) and CNOOC Ltd, the nation's second- and third-largest oil producers, rose in Hong Kong after they agreed to buy a $1.3 billion stake in an Angolan offshore oil block.

Sinopec rose 1.74 percent or HK$0.11 to close at HK$6.45 yesterday. CNOOC gained 4.5 percent or HK$0.44 to close at HK$10.22.

Sinopec and CNOOC agreed to purchase a 20 percent stake in Angola's deepwater Block 32 from Marathon Oil Corp, the companies said July 17. CNOOC chairman Fu Chengyu said in April rising protectionism is making overseas takeovers difficult.

"Chinese oil companies are interested in Africa because there aren't some of the political restrictions in buying assets that exist in other countries in the world," said Grace Liu, an analyst at Guotai Junan Securities. "Countries like Angola have quite rich oil resources and are open to Chinese development."

Opposition to Chinese investment helped blocked CNOOC's $18.5 billion bid for El Segundo, California-based Unocal Corp and Haier Group Corp's offer for US appliance maker Maytag Corp in 2005. Aluminum Corp of China failed in a plan to invest $19.5 billion in Rio Tinto Group.

CNOOC has interests in African oilfields in Nigeria, Kenya and Equatorial Guinea, according to its 2008 annual report.

Mainland Chinese companies have spent $12.6 billion on oil assets overseas since December, including in Singapore, Syria and Kazakhstan. Sinopec agreed last month to buy Geneva-based Addax Petroleum Corp for $7.2 billion, giving the mainland company access to reserves in Iraq's Kurdistan and West Africa.

The impact of the Marathon Oil deal on CNOOC and Sinopec's financial performance is unclear as the field is still under exploration, said Gordon Kwan, an analyst at Mirae Asset Securities in e-mailed comments. "The Angolan oil block has already yielded 12 discoveries" and "until more appraisals and development drilling are conducted, it is difficult to gauge the production and reserves potential," he said.

The field, 150 kilometers off the African nation's coast, is operated by Total SA of France, which owns a 30 percent stake.

Sonangol SA, Angola's state-owned oil company, owns 20 percent, CNOOC said on July 17. Marathon, the fourth-largest US oil company, will keep a 10 percent interest in the project.

"This suggests to us that Marathon still believes that the block could hold further potential long-term upside," Kwan said.

Bloomberg News

(HK Edition 07/21/2009 page4)