MercoPress. South Atlantic News Agency

Chinese company takes over Occidental petroleum assets in Argentina

China Petrochemical Corp, parent of Sinopec Corp, agreed to buy all of US-based Occidental Petroleum Corp's oil and gas assets in Argentina for 2.45 billion US dollars, marking the energy giant's first foray into the upstream market in Argentina.

Sinopec's move adds to a growing list of outbound deals in the natural resources sector by state-backed Chinese firms in the past two years as the world's most populous nation scrambles to secure resources for its surging economy.

Sinopec -the top refiner in Asia and China's largest oil firm by sales- said in a statement that the takeover was subject to government approvals.

Occidental's Argentina units hold interest in 23 production and exploration concessions in Santa Cruz, Mendoza and Chubut provinces, the statement said.

As of Dec 31, 2009, the concessions held gross proven reserves plus probable reserves of 393 million barrels of oil equivalent. Gross production from 22 producing concessions totalled over 51,000 barrels of oil equivalent per day in 2009, according to the statement.

“Overall I do think this is a fair price,” Neil Beveridge, analyst at Sanford C. Bernstein in Hong Kong, said of the deal.

”On a 2p (proved plus probable) reserves basis we think this is around $6.90 per barrel, which on a (proved) basis is probably slightly higher than the $9.10 that CNOOC paid for their share in the Pan American Company. These are very mature onshore oil assets so it is a good fit with Sinopec's core area of expertise.“

Occidental noted in its 2009 annual report that its concessions in Argentina expire in 2017, and it was looking to extend the terms of its concessions in Santa Cruz province.

”However, in the event Occidental is unsuccessful in obtaining these extensions, Occidental will re-evaluate its operations and investments in the country, which may result in decreases in future investment capital allocated to its operations in Argentina and further impairments of its existing investments,” the company said in its report.