September 5, 2018 / 4:16 AM / 2 months ago

China's Norinco, Hengli in talks to buy CEFC's stake in Abu Dhabi oilfields: sources

BEIJING/HONGKONG (Reuters) - A unit of China’s state defense giant Norinco and privately held Hengli Group are in discussions with the creditors of CEFC China Energy about taking over a stake in oilfields in Middle Eastern producer Abu Dhabi, sources with knowledge of the talks said.

CEFC logo is seen at CEFC China Energy's office in Shanghai, China May 3, 2018. REUTERS/Aly Song

CEFC’s creditors have over the past months been conducting sales of the debt-laden conglomerate’s global assets, including stakes in oil and gas fields in Abu Dhabi and Chad, and properties in Europe and Shanghai.

Zhenhua Oil, Norinco’s subsidiary in charge of oil and gas exploration, production and international trading, has been looking to expand its reserve base, with activities so far focused on Iraq.

Hengli Group, parent of Hengli Petrochemical, started looking at the stake in the oilfields “recently” after being approached by the China Development Bank, which is leading a team of creditors to repay CEFC’s heavy debts after the arrest of chairman Ye Jiemin in early 2018.

It’s not clear if state investment company CITIC Group remains interested in the stake. Reuters reported in April CITIC was then doing due diligence on the asset.

CEFC in February 2017 won a 4 percent stake in giant onshore oilfields majority-owned by Abu Dhabi National Oil Co [ADNOC.UL] for $900 million.

“(Hengli) is very cautious about venturing into a totally unfamiliar business, especially before the start-up of the (Dalian) petrochemical project,” said an executive with knowledge of the discussions.

A rush into a new business could worry capital markets already concerned about Hengli’s high spending on its petrochemical investment, the executive said.

Hengli’s listed entity Hengli Petrochemicals is slated to run tests on a new $11 billion refining and petrochemical complex in Dalian in October, one of China’s largest investments by a private firm in the sector.

The polyester group, started up by Jiangsu province entrepreneur Chen Jianhua, has no experience in oil and gas exploration.

The Abu Dhabi oilfields produce about 1.4 million barrels per day (bpd) of crude and CEFC’s share gives it the right to market about 2 million barrels a month of Murban crude, which is highly sought by Asian oil refiners.

Hengli and Zhenhua Oil declined to comment. CEFC and CITIC did not immediately respond to email requests for comment.

Reporting by Chen Aizhu in BEIJING and Kane Wu in HONG KONG; Additional reporting by Florence Tan in SINGAPORE and Julie Zhu in HONG KONG; Editing by Christian Schmollinger and Tom Hogue

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