Chinese oil company Sinochem is studying the sale of its 40 percent stake in Peregrino’s field, four sources familiar with the matter told Reuters in a deal in which the state-owned conglomerate could leave an asset considered key in the past due to low oil prices.
The oil and chemical company purchased its current stake along with Norway’s Statoil for $ 3.07 billion in 2010, beating a number of Chinese rivals for high-quality assets. Statoil holds the other 60 percent of Peregrino, which is the largest heavy oil field operated by the company outside Norway.
Two of the well-informed sources said Sinochem is moving to sell its largest oil and gas holding abroad – with a capacity to produce 100,000 barrels a day – amid a review of its assets to reflect the fall in oil prices in the last two and a half years.
With that in mind, one of the sources said, Sinochem is launching the sale process with a big discount in relation to the price paid by the company in the purchase of the asset.
“Peregrino has been a success story for Statoil, not only technically but also financially. The asset is very valuable and has a good operator with Statoil,” said Horacio Cuenca, director of upstream research for Latin America in consulting of energy Wood Mackenzie.
The long-term expectations for oil prices and the investment needed in the next two to three years to develop the second phase of Peregrino’s production will determine the value of any possible sale of stake in the asset, Cuenca said.
The process to sell Brazil’s stake is still in its initial stages and a final decision will depend on how negotiations progress, sources familiar with the matter said. The sources spoke on condition of anonymity because they were not allowed to discuss the subject publicly.
Statoil declined to comment.
In an e-mail response, Sinochem’s press office said the company “has been monitoring a lot of business opportunities in the market and is ready to readjust and optimize its asset structure at the right time.” Sinochem added, however, that it does not comment on specific projects.
Two sources said that Sinochem’s intention to sell the stake was shared with India’s Oil & Natural Gas Corporation. ONGC did not respond to requests for comments.
A source said the slice should also be offered to other international buyers, including some Japanese companies and Kuwait Foreign Petroleum Exploration Company, which bought Anglo-Dutch Shell’s stake in the Thai gas field Bongkot for $ 900 million last month.
SINOCHEM – ASSET MANAGER?
The possible sale of the stake in the Peregrino field – located 85 km off the Brazilian coast – comes at a time when oil prices are around $ 50 a barrel, well below the highs of recent years. This trend has also led other industry competitors to consider the sale of previously valued assets.
“Sinochem is re-adjusting its asset-to-energy structure,” said a Beijing-based industry veteran familiar with the company’s strategy. “As a medium to small-sized oil producer, exposure to higher-cost assets, such as in deep water, has become overly challenging.”
“The company sees itself more as an asset manager. This has become clearer under the new management,” said the industry executive, referring to Sinochem chairman Ning Gaoning, who took office last year.
The potential sale of the stake in Peregrino also comes before the second phase of the development of the project, which should require approximately 3.5 billion dollars, with the production of this new phase scheduled for the end of the decade.
The second phase should add about 250 million barrels of recoverable reserves to Peregrino, which currently holds an estimated reserve of between 300 million and 600 million barrels of recoverable oil.