CNOOC and Sinopec pay $1.3 billion for Angola assets

Two of China's state-owned oil companies, CNOOC and Sinopec International Petroleum Exploration and Production Corporation, are jointly buying a 20% stake in an Angolan oil field from Marathon Oil Corporation for $1.3 billion.

The stake is in a property called Block 32 -- a deepwater exploration block spanning 5,090 square kilometres. It has thus far had 12 oil discoveries, the first of which was in 2003. The field is located about 150km off the coast of Angola at a water depth of 1,400 to 2,200 metres.

Block 32 is operated by Total SA of France, which owns a 30% stake. Sonangol, Angola's state-owned oil company, owns another 20%, while Exxon Mobil Corporation, through a subsidiary, holds 15% and Portugal's Galp Energia Group the remaining 5%. Marathon, which was awarded equity interests in adjacent Blocks 31 and 32 by Sonangol in 1999, currently owns 30% in Block 32 and will consequently still hold 10% after this deal. The US firm also owns 10% in Block 31.

Marathon's partners have a first right of refusal on the 20% stake being sold, but sources suggest none of the parties is keen to increase exposure to the block right now. Standard Chartered Bank ran an auction for the stake on behalf of Marathon.

The US company, which owns the stake through a subsidiary -- Marathon International Petroleum Angola Block 32 -- put the 20% interest up for sale almost a year ago and analysts have speculated that Marathon was hopeful of a $2 billion price tag. However, the subsequent meltdown of financial markets had a cascading effect on commodity prices and valuations have continued to be negotiated between the parties, with some consensus emerging this summer. The deal is expected to close by the end of 2009.

Among other parties rumoured to be interested in the asset last year were India's state-owned oil company, the Oil and Natural Gas Corporation (ONGC).

CNOOC and Sinopec, which are both being advised by Credit Suisse, will create a 50:50 joint venture to make the acquisition. Sinopec already has an interest in an oil block in Angola, while this is CNOOC's first foray into the country. Angola is a key African source of oil for China, along with Nigeria, and sources say this deal could herald closer ties between the two countries.

Houston-based Marathon is an energy company engaged in exploration and production with operations across North America, Europe, Africa and Asia. It is the fourth-largest US-based integrated oil company and the country's fifth largest refiner.

Marathon announced last year that it would be reviewing its options with the intention to divest some assets and could also split itself into an upstream and downstream company. However, it said recently that it will not be pursuing a split of the company in the immediate future as it feels the current environment is better suited to a fully-integrated oil company.

CNOOC is a Hong Kong-listed subsidiary of Beijing-headquartered China National Offshore Oil Corporation, which is China's largest offshore oil and gas producer. Sinopec is an energy and chemical company engaged in oil and gas exploration and production as well as downstream refining businesses.

Marathon's shares gained 0.4% to $30.26 in New York trading on Friday. In Hong Kong, CNOOC added 1.7% to close at HK$9.78 ($1.26), while Sinopec gained 1.3% to HK$6.34.