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CNOOC, Sinopec Weigh $7 Billion Bid for OGX Assets

OGX CEO Eike Batista
Eike Batista, chief executive officer of OGX Petroleo & Gas Participacoes SA. Photographer: Adriano Machado/Bloomberg

Cnooc Ltd. and China Petrochemical Corp. may offer at least $7 billion for Brazil oil assets and a stake in OGX Petroleo & Gas Participacoes SA, according to two people with knowledge of the matter.

OGX, which is based in Rio de Janeiro and controlled by billionaire Eike Batista, may seek to sell an equity stake of less than 30 percent as well as oil blocks, one of the people said. While binding offers would be due around the middle to end of next month, no offer has been presented and Cnooc hasn’t decided whether to make a joint bid, according to the person.

Chinese oil companies are seeking assets overseas to secure crude supplies needed to fuel the world’s fastest-growing major economy. Sinopec Group, as China Petrochemical is known, bought Addax Petroleum Corp. for C$8.3 billion ($8 billion) last year to add oil reserves as part of the record $32 billion of acquisitions by Chinese companies in natural resources.

“The Chinese are buying a lot of commodities companies around the world to supply growth,” Luiz Augusto Pacheco, an analyst at Omar Camargo Corretora in Curitiba, Brazil, said today in a telephone interview. “They are willing to pay more because they need it and the Chinese have the money right now.”

Huang Wensheng, a spokesman for Sinopec Group, and Jiang Yongzhi, a spokesman for Cnooc, couldn’t be reached at their Beijing offices and cell phones. OGX’s press office said in an e-mailed statement that it doesn’t comment on rumors.

‘No Big Hurry’

Chief Financial Officer Marcelo Faber Torres said on an OGX conference call on Aug. 12 that a planned sale of part of its oil block assets would happen in late 2010 or early 2011. OGX is “in no big hurry” to sell the stakes in the blocks because of the potential to find more oil in the “very valuable” areas, Torres said.

OGX has 3.69 billion barrels of potential reserves at its seven blocks in the Campos Basin off Brazil’s coast, according to a 2009 report by certification firm DeGoylyer & MacNaughton. OGX has made additional discoveries of heavy crude oil in the area this year and may increase its reserves estimates, Pacheco said.

OGX’s Campos reserves are worth about $10 a barrel, taking into account exploration and development costs, Andres Kikuchi, an analyst at brokerage Link Investimentos who rates the stock “outperform,” said by telephone from Sao Paulo.

OGX Shares Rise

OGX rose 5 centavos, or 0.3 percent, to 19.93 reais in Sao Paulo trading at 12:41 p.m. New York time. It has risen 17 percent this year, compared with a 3 percent drop for Brazil’s benchmark Bovespa index.

Statoil ASA, Repsol YPF, Devon Energy Corp. and Royal Dutch Shell Plc have sold offshore assets in Brazil this year amid strong demand and limited supply. Brazil’s government hasn’t sold any exploration blocks in more than year as it revamps oil legislation that’s intended to put state-run Petroleo Brasileiro SA in control of all new deepwater projects.

Sinochem Group agreed in May to pay about $15 a barrel for a stake in Statoil ASA’s Peregrino oil field that borders on OGX’s blocks in Campos, Kikuchi said. Peregrino is closer to commercial production than OGX’s fields, making Peregrino more valuable, Kikuchi said.

In March, Cnooc agreed to buy a 50 percent stake in Argentine oil producer Bridas Corp. for $3.1 billion to gain access to oil reserves.

Bridas, controlled by Argentine businessman Carlos Bulgheroni, owns a 40 percent stake in Pan American Energy LLC, the largest crude-oil exporter in the country, and also has oil and gas assets in Chile and Bolivia. BP Plc, Europe’s largest oil company, owns the remainder of Pan American.

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