Sinopec buys Conoco stake in Syncrude as China keeps making energy deals

Syncrude deal part of China’s oil shopping spree

NEW YORK — China’s not done shopping the globe for oil.

On Monday, a Beijing-backed oil producer announced the country’s largest deal yet in North America, paying ConocoPhillips $4.65 billion for its minority stake in a Canadian oil sands project.

Oil is a primary target for China, given the country’s huge appetite for energy. The agreement with ConocoPhillips continues a trend of aggressive buying by the Chinese for energy resources, said Fadel Gheit, an analyst with Oppenheimer & Co.

“They’re going for big chunks of assets,” Gheit said.

For ConocoPhillips, the sale of its 9.03 percent stake to Sinopec, which is the international division of China Petroleum & Chemical Corp., is part of its plans to sell about $10 billion in assets by 2011. The company is paring back an expansion undertaken in the middle of last decade.

As China’s economy grows, the country has expanded its reach around the globe for raw materials. China already passed the U.S. as the largest market for new cars. Last month, sales of passenger jumped 63 percent in China from a year earlier.

In March, China National Offshore Oil Corp. said it would pay $3.1 billion for a 50 percent stake in an Argentine energy firm. That same month, Arrow Energy Ltd., an owner of gas assets in Australia, agreed to a joint takeover bid from Shell and PetroChina worth $3.15 billion.

In November, Cnooc bought part of Statoil ASA’s interests in the Gulf of Mexico.

Cnooc was stymied in its bid for U.S. oil and gas producer Unocal Corp. in 2005. The Chinese company withdrew its $18.5 billion offer after U.S. lawmakers compalined about how the sale would jeopardize national security.

Syncrude, located in Alberta, is the world’s largest oil sands project. Industry officials estimate the region could yield as much as 175 billion barrels of oil, which would make Canada second only to Saudi Arabia in crude oil reserves.

But the process of making the thick oil in the sands thin enough to transport to the surface by pipeline is costly.

China, with its large reserves of cash and hunger for energy, is willing to pay a premium for the Conoco stake.

“They’re buying with cash, which they have a lot of,” Gheit said. “For them, cash is trash. They don’t want it. They want to convert it into real assets.”

China also doesn’t seem to share others’ environmental concerns about crude from the oil sands, which emits more carbon dioxide than other sources of oil, said Jim Byrne, an analyst with BMO Capital Markets-Canada.

The Syncrude joint venture includes Canadian Oil Sands Ltd., Imperial Oil Resources, Mocal Energy Ltd., Murphy Oil Co., Nexen Oil Sands Partnership, Suncor Energy, Inc. It employs more than 5,000 people.

Last year, Syncrude produced 102.2 million barrels of crude.

Canadian Prime Minister Stephen Harper didn’t have an immediate reaction, but noted that the government has a process for approving large foreign investments.

ConocoPhillips “got a good price,” said Byrne. “The Chinese have almost an insatiable thirst for oily assets. They’re still resource poor.”

The company said the Syncrude deal should close in the third quarter pending approvals by the Chinese and Canadian governments.

ConocoPhillips said last year that it would dramatically reconfigure its operations to focus on more profitable ventures. In addition to the asset sale, the company in March said it would sell half of its 20 percent stake in Russian oil giant Lukoil. That stake is worth about $5 billion.

ConocoPhillips shares added 64 cents to close at $55.96.