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CNPC, Sinopec in joint bid for Peru's Petro-Tech

BEIJING (Reuters) - Peruvian offshore oil and gas driller Petro-Tech Peruana is in the sights of China’s top two oil firms, CNPC and Sinopec Group, with a rare joint takeover bid worth up to $2.5 billion.

The two have teamed up to submit a joint bid of between $1.5 billion and $2.5 billion for the private U.S. firm, which has eight exploration licenses and made Peru’s first ever offshore oil discovery, a Beijing-based industry official said on Tuesday.

Sources with knowledge of the situation told Reuters last week that Petro-Tech was up for sale and that Chinese firms were likely to make an offer. It was not clear if they would face any competition for Petro-Tech, although Peruvian newspaper Gestion said in January that Royal Dutch Shell Plc was interested in buying the firm.

Petro-Tech, which is owned by Houston-based Offshore International Group, has been an active bidder for licenses to prospect in shallow Peruvian offshore waters and now has more than 5 million acres. It produces just 22,000 barrels of oil per day, but several discoveries point to greater potential.

In June, it made an important natural gas discovery at Block Z-2B, five miles off the northern coast in Piura, close to its San Pedro field, which was discovered in 2005. The two fields have reserves estimated at up to 1.2 trillion cubic feet and they could cost up to $120 million to develop.

In April, Petro-Tech found an oil reserve of 1.13 billion barrels at block Z-6, also in northern Peru. It could begin production as early as 2010.

Peru has proven natural gas reserves of more than 13.4 trillion cubic feet but oil production has been in long-term decline and the government wants investors to help boost output of both oil and gas.

Peru’s shortage of energy, exacerbated by a hydroelectric drought this year, has rattled its power-hungry mining industry, the backbone of the economy, which is racing to keep up with demand from China. Several Chinese mining and metals companies such as steelmaker Shougang Corp have already invested in Peru.

Peru would be a new departure for Chinese oil firms, which - after a flurry of overseas deals in the first half of the decade - appear to have slowed acquisitions as big, premium-quality assets get more scarce and costly.

Coordination is increasing among Beijing’s oil trio -- CNPC, Sinopec and offshore specialist CNOOC Ltd -- to avoid clashes in competing for the same targets.

“With little success securing bigger assets, companies are now forced to look at medium or small-sized ones like this Peru one,” said the Beijing official.

“Then it means you pay a higher cost per barrel.”

CNPC’s listed subsidiary, PetroChina, is developing heavy oil resources in Venezuela, while Sinopec is bidding for assets in Russia and - jointly with Chinese number three oil firm CNOOC - in Angola.

“Peru strikes me as a place that will be a whole lot easier for Chinese state-owned enterprises to operate in than some private outfit out of Houston,” said Larry Grace, a Hong Kong-based analyst at Kim Eng Securities.

Despite the surge in oil prices over the past year, profits at both Sinopec and PetroChina have suffered because of the need to refine expensive crude into gasoline that sells at state-capped prices in China. That could help explain the unusual joint bid for Petro-Tech, Grace said.

“Working as a team allows for both refiners to benefit, and for the regulators not to be accused necessarily of playing favorites in reducing exposure to swings in the oil price.”

Petro-Tech, Sinopec and CNPC officials were not immediately available for comment.

Additional reporting by Tom Miles in Hong Kong; Editing by Ken Wills, Paul Bolding

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