DEALTALK-China's CNOOC may be eyeing BP's Argentine assets

Thu Aug 5, 2010 12:09pm EDT

Related Topics

* British firm plans to sell up to $30 billion in assets

* PAE seen worth up to $20 bln, BP has 60 percent stake

* CNOOC (0883.HK) already owns indirect stake in PAE

By Luis Andres Henao

BUENOS AIRES, Aug 5 (Reuters) - China's largest offshore oil producer CNOOC Ltd might bid for BP's stake in Pan American Energy (PAE) if the British oil company sold it to raise money to cover its Gulf of Mexico oil spill costs.

BP (BP.L)(BP.N) plans to sell assets worth up to $30 billion to pay for one of the worst oil spills in U.S. history. It has said it would sell holdings in Colombia, Canada and Egypt, as well as Pakistan and Vietnam. [ID:nLDE6721BP]

Its stake in PAE is one of the company's most prized Latin American assets. Investment in energy output and exploration has lagged in Argentina, but PAE's reserves and output have risen in the last decade and Argentine analysts say the country's No. 2 energy firm could be worth up to $20 billion.

BP has a 60 percent stake in PAE and Argentina's Bridas holds the rest. CNOOC bought half of Bridas for $3.1 billion in March. [ID:nN15194028]

Industry sources say PAE is one of the assets BP has considered selling because it is less important than other assets, though its reserves and output are growing. BP has said there will be no fire sale.

"If BP wants to get rid of Pan American, it will have potential buyers because PAE has significant reserves." said Daniel Montamat, a former Argentine energy secretary who also ran the country's biggest energy firm, YPF (REP.MC)(YPFD.BA). "CNO0C would be one of the interested parties in Pan American because China is diversifying its reserves."

Some analysts say Argentine tax rules would put CNOOC off buying more assets there. "We always have no comment on these market rumors," a spokesman for the state-owned company.

It is unlikely that Bridas would bid because of its recent sale of assets to CNOOC, Montamat said.

"If Bridas sold a stake in Pan American, it's because it needed financial backing to support exploration bets abroad," Montamat said. "It's unlikely that Bridas would use money from the last deal to buy assets in Pan American again... This operation requires a larger company with stronger finances."

PAE and BP, which also has interests in Venezuela, declined to comment, and no one at Bridas could be reached.

STRONG RESERVES

PAE owns Cerro Dragon, one of the largest shallow oil and natural gas fields in southern Argentina.

Once deemed near the end of its life, Cerro Dragon sets output records at about 80,000 barrels per day of oil, 80 percent of PAE's total output, and 130 million cubic feet of natural gas a day.

Other Argentine energy companies such as YPF, the local unit of Spain's Repsol (REP.MC), have let their reserves run down because of government price controls and political uncertainty, but PAE has bucked that trend.

Its reserves have risen to 1.41 billion barrels of oil equivalent from 858 million in 2000, a PAE spokesman said. Oil output has climbed 48 percent in the last decade, while natural gas production has almost doubled.

"Instead of wasting its reserves, PAE has been renewing them and making new explorations," said Emilio Apud, a consultant and former energy secretary who also sees CNOOC as a possible bidder for BP's stake in PAE. "The Chinese are very interested in making inroads here."

"It's the second-largest energy company in Argentina, but I wouldn't be surprised if it leads the sector in a few years based on its reserves," he said.

Apud valued PAE at up to $20 billion, setting the price of BP's stake "closer to the $10 billion mark."

"BP can ask for a very good price for Pan American," said Gustavo Calleja, former Argentine deputy fuels secretary. "It's the only energy firm in Argentina that can get such a good price." (Additional reporting by Tom Bergin in London and Joseph Chaney in Hong Kong; Editing by Helen Popper and Robert MacMillan)

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