China's Yanchang to tap Madagascar oil blocks

BEIJING Tue Jan 12, 2010 11:55pm EST

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BEIJING Jan 13 (Reuters) - China's Shaanxi Yanchang Petroleum Group has bought 15 percent of a Hong Kong-listed firm that operates oil blocks in Madagascar, marking one of the few non-major Chinese oil firms venturing into overseas hydrocarbon assets.

Shaanxi Yanchang, an oil producer and refiner backed by the Shaanxi provincial government, struck the deal with Sino Union Energy Investment Corp (0346.HK), the latter said in a statement on its website (www.sunpec.com). The value of the deal was not given.

The deal will allow Yanchang Petroleum to tap two oil blocks -- block 3113 and block 2104 -- in Madagascar owned by Sino Union.

Yanchang Petroleum, together with Sino Union and Hong Kong and China Gas Co (0003.HK), planned to set up a joint venture in Madagascar to develop and operate the oilfields, the statement said.

Block 2104 has an estimated oil reserves of some 3.6 billion barrels and natural gas of 66.24 billion cubic metres, while block 3113 is estimated to hold oil reserves of no less than 2 billion barrels, the statement said, citing an international evaluation agency.

It did not specify whether the reserves are proven reserves or geological reserves, nor did not it say how much investment was needed.

Sino Union won 30 years of oil production rights and 35 years of natural gas production on block 3113 and 2104 in 2007.

Yanchang Petroleum is one of China's few sizeable regional oil firms outside state energy giants Sinopec Corp (0386.HK) and PetroChina (0857.HK).

In 2009, the firm, in northern Shaanxi province, produced 224,000 barrels per day of crude and processed almost all of them at its own refinery. (Reporting by Beijing newsroom, Editing by Chen Aizhu)

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