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CNPC Suspends Talks With Chevron Over Oil-Field Stake

THE WALL STREET JOURNAL

MARCH 20, 2009

BEIJING — China National Petroleum Corp. suspended talks with Chevron Corp. over an oil-field stake in the Gulf of Mexico.

CNPC apparently thinks it deserves a better deal in return for allowing the U.S. company access to one of China’s biggest natural-gas fields back in 2007.

A CNPC stake in the Gulf of Mexico would be a victory for Chinese oil firms, which say they have been shut out from investing in U.S. companies ever since Cnooc Ltd.’s $18.5 billion bid for Unocal failed in 2005 amid U.S. political opposition. Instead, Chevron ended up buying that company. Since then, Chinese firms have shifted their focus to nations including Venezuela.

[cnpc and chevron deal]Associated Press

A Chinese worker checks valves and pipes in a CNPC refinery in Lanzhou.

A CNPC official said Chevron last month provided technical data on the Big Foot deep-water oil field south of New Orleans, offering CNPC a possible 12.5% stake in the field. “Talks with Chevron are currently on hold. We wanted more equity than the 12.5% stake it was proposing,” the official said on condition of anonymity.

Chevron has a 60% interest in Big Foot. Norway’s StatoilHydro ASA and Royal Dutch Shell PLC have stakes of 27.5% and 12.5%, respectively. A stake sale of 12.5% would reduce Chevron’s holding to 47.5%.

“Chevron is not currently in any discussions on sale or partial sale of Big Foot,” said a Chevron spokesman. He didn’t comment on any previous contact with CNPC regarding the field. A CNPC spokesman couldn’t be reached for official comment.

China’s state oil giants have stepped up their hunt for oil and gas assets, taking advantage of low valuations triggered by tight credit markets and a $100-a-barrel plunge in oil prices from their peak last year. China imports half of the crude oil it uses.

No details on the value of the Big Foot stake deal were available.

China’s deal-making in the resources sector in recent months has triggered a flurry of reactions. In Australia, the government is calling for a Senate inquiry into foreign investment as state-owned companies backed by Beijing seek Canberra’s approval for more than $22 billion of resources deals, including a planned US$19.5 billion tie-up between Aluminum Corp. of ChinaLtd. and Anglo-Australian mining giant Rio Tinto PLC.

Opponents point to a lack of reciprocity in China, with foreign firms hard-pressed to clinch deals except in partnership with state-run firms. Critics were given further ammunition Wednesday when China’s Ministry of Commerce blocked a $2.4 billion bid by Coca-Cola Co. for China Huiyuan Juice Group Ltd. on competition grounds.

The CNPC official said Chevron’s willingness to farm out a stake in Big Foot was due to the U.S. company’s successful bid in 2007 to develop the Chuandongbei natural-gas block in China’s Sichuan province.

Chevron signed a 30-year production-sharing contract with CNPC on the area, which is the largest the Chinese company has ever offered to a foreign partner. The 800-square-mile field has an estimated resource base of five trillion cubic feet of gas, equivalent to 142 billion cubic meters.

Write to David Winning at [email protected]

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