CNPC, KazMunaiGas seal $2.6 Billion MMG Deal
China National Petroleum Corp. has finalized a $2.6 billion (euro 1.74 billion) deal with Kazakhstan's state energy company to jointly buy the Central Asian country's fourth-largest oil producer, Kazakhstan's KazMunaiGas said in a statement Wednesday.
The companies bought MangistauMunaiGas, which controls oil reserves estimated at around 500 million barrels, through an investment venture owned by KazMunaiGas and CNPC with funds largely provided by the state-owned Export-Import Bank of China.
CNPC's acquisition of a 50 percent stake in the Kazakh-based company is the latest success in a global energy asset buying spree by Chinese companies. It further consolidates the Asian giant's interests in the energy-rich region.
MangistauMunaiGas produces 110,000 barrels of oil daily.
The purchase of MangistauMunaiGas from British Virgin Islands-registered Central Asia Petroleum Ltd. was due for completion in July, but was reportedly delayed due to issues relating to the oil company's outstanding tax liabilities.
CNPC and KazMunaiGas initially agreed the joint purchase of MangistauMunaiGas as part of larger deal for China to lend Kazakhstan $10 billion.
China is undertaking a long-term project to bolster its energy security by sealing deals with neighboring states, including Kazakhstan, and reduce its reliance on maritime oil transportation routes.
Earlier this year, China's sovereign wealth fund announced that it had paid $949 million for an 11 percent stake in KazMunaiGas subsidiary, JSC KazMunaiGas Exploration Production.
In February, China signed a long-term oil supply contract and pipeline deal with Russia worth $25 billion. Days later, Brazil agreed to supply up to 100 million barrels of crude oil a day to China in exchange for a loan of up to $10 billion.
That same month, Venezuela and China struck a deal to put an additional $6 billion into a fund used finance joint development projects in areas including oil production.
CNPC has been operating in Kazakhstan for several years and is the largest Chinese energy company in the country.
It bought Canadian-run oil producer PetroKazakhstan for $4.18 billion in 2005, the largest foreign purchase by a Chinese company at the time. A 33 percent stake in PetroKazakhstan was sold to KazMunaiGas in July 2006 amid pressure from the Kazakh government for greater national ownership of the energy sector.
In 2008, China imported six million tons of oil through the Kazakhstan-China oil pipeline, a 26 percent increase on the previous year. Russia also uses the route, which is jointly managed by CNPC and KazMunaiGas, to transport its oil exports to China.
Kazakhstan is eager to diversify its oil export routes, most of which currently go to Western buyers across Russian territory, according to Business Week.