* Sinopec to form JV with parent on acquisition
* JV to buy $3 bln of oil, gas assets from Sinopec's parent
* Deal to boost Sinopec's reserves by 9.1 pct
* Deal to increase Sinopec's annual crude output by 11.2 pct
By Charlie Zhu
HONG KONG, March 25 China Petroleum and Chemical
Corp (Sinopec Corp) , Asia's largest refiner,
will pay $1.5 billion for overseas oil and gas-producing assets
held by its parent in a long-awaited move to reshape its
business and improve earnings.
Shares of Sinopec jumped more than 3 percent in
early Hong Kong trade in reaction to the plan announced on
Sunday, outperforming a 0.7 percent gain in the blue-chip Hang
"The announcement... is the first step toward restructuring
the business toward the upstream which is likely to see a
gradual improvement in returns and potentially significant value
upside in the long term," Scott Darling, head of Asia oil and
gas research at Barclays Capital, wrote in a note.
Sinopec Corp has lagged behind bigger domestic energy
producer PetroChina Co Ltd in
acquiring overseas fields to offset refining losses, having made
its first and so far only purchase of upstream assets in 2010.
Chinese refiners cannot fully pass on higher crude oil costs
to customers because of government price controls.
Sinopec Corp said a year ago that it was considering buying
more overseas upstream assets from its parent Sinopec Group to
boost oil and gas production and counter losses.
Sinopec Corp - which relies on imports for most of the crude
it refines - said late on Sunday it would set up a joint venture
with its parent that will acquire $3 billion worth of oil and
gas assets held by the latter.
The deal would boost Sinopec's proven reserves by 9.1
percent to 3.1 billion barrels of oil equivalent (boe), and its
annual crude production would rise 11.2 percent to 365 million
barrels, the company said.
The 50/50 venture will buy oil and gas-producing assets with
310 million barrels in proven and probable reserves from Sinopec
Group, formally known as China Petrochemical Corp.
Sinopec Corp, whose oil and gas output reached 427.95
million barrels in 2012, will use internal funds and loans for
its share of the venture. It said it would take management
Sinopec Group has spent around $40 billion buying global
assets in the last three years, including the $7.24 billion
purchase of Swiss explorer Addax Petroleum Corp in 2009 to gain
access to fields in West Africa and Iraq's autonomous Kurdistan
At least half of the group's overseas assets are in
countries such as Syria, Argentina and Russia, where the
reserves are either of poorer quality, too small or in areas
fraught with political risk, analysts say.
Sinopec Group may eventually inject as much as half of its
global oil and gas reserves into Sinopec Corp, which is far from
enough to cut the unit's exposure to unprofitable refining at
The assets Sinopec Corp is buying through the joint venture
were located in Kazakhstan, Colombia and Russia.
The venture will buy 50 percent of issued share capital of
Caspian Resources Ltd in Kazakhstan for $1.6 billion, and 50
percent of Mansarovar in Colombia for $428 million that includes
the takeover of a loan of $348 million from Mansarovar's
shareholders, it said.
Sinopec will also buy from its parent 49 percent of issued
share capital of Taihu - a partnership with Russian oil giant
Rosneft in Russia - for $560 million and a special dividend held
by its parent in the partnership for $93 million.
Sinopec, which on Sunday reported a 12.8 percent fall in
2012 net profit due to a drop in revenues from its upstream and
chemicals businesses, bought deepwater oilfields in Angola from
its parent for $2.46 billion in 2010.
Its refining division - where throughput edged up 1.8
percent to 221.31 million tonnes last year - made an operating
loss of 11.95 billion yuan ($1.92 billion) under Chinese
accounting standards, compared with a loss of 37.6 billion yuan
the previous year.