Sinopec Buys Oxy’s Argie Assets

Sinopec, a subsidiary of China Petrochemical Corp, is buying the Argentine oil and gas assets of US-based Occidental Petroleum (Oxy) for about $2.5bn in after-tax proceeds. A source with knowledge of the deal says Sinopec will finance the acquisition mostly with loans from Chinese national banks. “There were no private banks involved. The Chinese government has a lot of dollars in reserves and part of it is earmarked for natural resource investments,” he explains. Sinopec will also use some cash on hand. A banker away from the deal says that the price being paid is attractive for Sinopec, as asset values in Argentina are constrained by the local government’s cap on the price per barrel of oil at around $50. The deal comes shortly after Bridas, 50% owned by national Chinese oil company CNOOC, announced it would acquire BP’s stake in Pan American Energy, also in Argentina, for $7.1bn. This is not Sinopec’s first deal in LatAm. In October, it sold a 40% stake in its Brazil unit to Chinese oil firm Sinopec for $7.1bn. Scotia Waterous advised Sinopec on both the Oxy and Repsol deals and Oxy did not use outside financial advisors, the source says. Oxy expects the deal to be completed in Q1 2011. The Argentine assets being divested produce approximately 44,000 barrels of oil per day.