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CNPC Buys Shell Unit Stake for Estimated $1.5 Billion

China National Petroleum Corp., the country’s biggest energy company, agreed to acquire a 35 percent stake in Royal Dutch Shell Plc’s oil and gas unit in Syria in a deal an analyst said may be worth $1.5 billion.

The companies will seek joint investment opportunities in Syria after the accord, CNPC and Shell said in separate statements on their websites, without stating the value of the deal. The stake may be worth about $1.5 billion if CNPC gets a third of Shell’s 23,000 barrel-a-day output over 20 years, said Gordon Kwan, head of energy research at Mirae Asset Securities.

“This is not a lot of oil and gas for a company like CNPC, which is producing about 2.5 million barrels a day,” Kwan said by telephone from Hong Kong. “It’s a chance to further develop cooperation with Shell in ventures overseas and to also increase its presence in Syria and the Middle East.”

Chinese companies spent a record $32 billion on mining and energy acquisitions last year, securing oil fields, coal and metal mines in Africa, Asia and Australia to meet demand in the world’s fastest-growing major economy. CNPC, the parent of PetroChina Co., increased its overseas crude oil production by 12 percent last year to a record 1.4 million barrels a day after adding fields in Kazakhstan and Canada.

The Syria unit has interests in three production licenses covering about 40 oil fields. CNPC has been operating in Syria since 2002.

Liu Weijiang, a Beijing-based spokesman for CNPC, declined to comment on the estimate, saying he is unaware of the value of the deal. Tjerk Huysinga, Shell’s spokesman in the Hague, didn’t pick up calls made to his office.

Overseas Plans

“It’s hard to estimate the value of the deal, as we don’t know if production will rise or fall from current levels,” said Brynjar Eirik Bustnes, an analyst at JPMorgan Securities Ltd. in Hong Kong. “Assuming that production stays at current levels, then a valuation of $1.5 billion may be on the high side.”

Syria had proven oil reserves of 2.5 billion barrels at the end of 2007, according to the BP Statistical Review of World Energy. This compares with Saudi Arabia’s 264.2 billion barrels.

The stake in the Syrian fields would add little to CNPC’s oil production, Bustnes said. “Perhaps there’s less competition to secure assets in a country like Syria,” he said.

CNPC’s first-quarter overseas crude oil output jumped 13 percent from a year earlier while gas production abroad surged 67 percent, the company said last month.

Its unit PetroChina plans to spend at least $60 billion in the next decade on overseas acquisitions to increase production. The shares have fallen 1 percent in Hong Kong in the past year, compared with the 13 percent gain in the benchmark Hang Seng Index. PetroChina was at HK$8.37 at 2:31 p.m. local time, down 1.8 percent.

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