Total and Sinopec Finalise Nigerian Oil Field Deal

on Nov 20, 2012

On 19 November 2012, the Paris-based energy producer Total SA (NYSE:TOT, LON:TTA, EPA:FP) announced that it had finalised an agreement to sell its 20 percent stake in an offshore Nigerian field to China Petroleum & Chemical Corp (NYSE:SNP, HKG:0386, SHA:600028), popularly referred to as Sinopec. The deal, which will boost Sinopec’s recoverable oil reserves, will also help the French energy group finance its ambitious exploration plans.

**Sinopec Acquires Total’s Stake in a Nigerian Oil Field**
The deal, subject to approval by the Nigerian authorities, will see Sinopec acquire Total’s 20 percent stake in the OML 138 block, which contains the Usan field located off the coast of the Niger Delta. As announced in Total’s press release, the Chinese state-backed refiner will buy the asset for approximately $2.5 billion (£1.6 billion). As noted by the Financial Times, following the transfer, Sinopec will take command of oil production running at 24,000 barrels a day whereas the Chinese company’s recoverable reserves will be boosted by 100 million barrels.

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“This transaction will add a sizeable asset to Sinopec’s portfolio and provide the company with another opportunity to acquire and develop experience and expertise in deepwater exploration and production,” the Chinese Beijing-backed energy group noted, as quoted by the FT. Bloomberg reports that the deal is the largest for Sinopec since it bought 30 percent of Petrogal Brasil for $4.8 billion in 2011.

**African Interests**
In developing the Nigerian oil field, Sinopec will cooperate with the local subsidiaries of Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) each holding 30 percent, as well as with Nexen (TSE:NXY) which holds the remaining 20 percent, meaning that Chinese state-backed companies may end up owning a 40 percent stake if CNOOC’s (HKG:0883, NYSE:CEO) bid for the Toronto-listed Nexen goes through.

!m[The Beijing-Backed Energy Producer To Acquire The Stake For $2.5 Billion](/uploads/story/856/thumbs/pic1_inline.png)The FT reports that Sinopec already holds interests in Nigeria as well as in Cameroon and Gabon, following its takeover of Addax Petroleum in 2009. Africa has recently turned into an attractive destination for state-backed Asian companies seeking oil and gas assets abroad, given the lighter regulations compared to Europe and North America.

**Total to Finance Exploration**
The Nigerian oil field deal, which is part of Total’s $15-20 billion asset sale programme announced in September, is expected to help the French energy producer fund its exploration plans. “The transaction is aligned with Total’s active portfolio management,” noted Yves-Louis Darricarrere, Total’s head of exploration and production in the company press release. “This sale of an asset operated from a minority position will allow us to focus our resources on the material growth opportunities in Total’s portfolio.”
Yet, Total has indicated that it will not “walk out” of Nigeria, with Reuters quoting Total’s CEO Christophe de Margerie as saying recently that the company is “happy to develop its projects in Nigeria.” Among Total’s Nigerian assets are the Akpo field in OML 130 and the Egina field which the company prepares to develop, as noted in the press release. In addition, Total recently started the second phase of the Ofon field development, mostly intended to recover natural gas reserves.


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