SINGAPORE/BEIJING Oil giant Sinopec Group along with Chinese banks are in talks to put up to $1 billion in a Texas clean energy project, in what would be one of the biggest investments by Chinese companies in the U.S. power sector, the Wall Street Journal reported on Wednesday.
The Chinese group is looking to acquire an equity stake in and provide financing to the roughly $2.5 billion Texas Clean Energy Project, which is being developed by Seattle-based Summit Power Group, the newspaper said.
Besides Sinopec Group, which is the parent of Hong Kong-listed Sinopec Corp (0386.HK), Siemens AG (SIEGn.DE) and Linde AG (LING.DE) are also involved in talks for the project, a person familiar with the negotiations told Reuters.
"It's a big international cooperation project," said the source, who declined to be identified because he was not allowed to speak to the media.
Sinopec Group declined to comment. Siemens and Linde were not immediately available for comment.
Sinopec Group, PetroChina (0857.HK) (PTR.N) and CNOOC Ltd (0883.HK) have been leading Asia's oil and gas acquisitions overseas, with Chinese purchases totalling $5.1 billion in the first half of this year, according to Thomson Reuters data. That compares with $16.3 billion last year and $23.4 billion in 2010.
China's strong interest in North American energy assets, particularly CNOOC's recent $15.1 billion bid for Canada's Nexen NXY.TO, has raised alarm bells among a handful of U.S. lawmakers who fear America's national security interests could be undermined.
Summit Power, which is also in talks with other potential investors in the United States and Europe, is seeking to carve out a role for Chinese investors that does not upset existing engineering and construction agreements, the newspaper said.
An agreement between Sinopec Group and Summit Power could be announced as early as September, the newspaper added.
Sinopec Group is looking to buy "a large part" of equity for the project, the source said.
Through the clean-coal project, Sinopec Group hopes to gain experience in carbon dioxide flooding, a process in which carbon dioxide is injected into an oil reservoir in order to increase output when extracting oil, to be used in its own oil fields later, he said, adding that the project is also a very profitable for investment.
The 400-megawatt Texas Clean Energy Project will be an Integrated Gasification Combined Cycle facility capable of capturing between 90 and 99 percent of the carbon dioxide, sulfur dioxide, nitrogen oxide and mercury it produces.
The project will receive $450 million in federal funding, according to the U.S. Department of Energy. The facility is expected to be fully operational in 2015.
(Reporting by Wan Xu in Beijing and Randy Fabi in Singapore; Editing by Kazunori Takada and Chris Gallagher)