aed sinopec joint venture...60pct sinopec, page-68

http://www.ft.com/cms/s/0/76d9e104-ec72-11dc-86be-0000779fd2ac.html

Sinopec buys into Timor Sea oil assets
By Justine Lau and Robin Kwong in Hong Kong

Published: March 8 2008 02:21 | Last updated: March 8 2008 02:21

Sinopec has agreed to pay A$600m (US$557m) for some of the assets of Australia’s AED Oil in the Timor Sea, which will be China’s first Australian oil acquisition.

The deal follows overseas mining and energy acquisitions by Chinese companies aimed at fuelling the country’s economic boom. Aluminum Corporation of China (Chinalco) last month spent US$14.1bn in conjunction with Canada’s Alcoa to buy into the UK-listed arm of Rio Tinto.

EDITOR’S CHOICE
Ecuador seeks private oil field developers - Mar-04Gas is key to future growth of oil groups - Mar-02Vacuuming up small assets in south-east Asia - Feb-26Lex: Chinese equity raising - Feb-20Investors shift bets to oil slide - Jan-27IEA says demand for oil set to slow - Jan-16Deals by Sinopec include a US$2bn investment to develop an oilfield in Iran, announced in December 2007. In August 2006, Sinopec teamed up with India’s Oil and Natural Gas Corp to pay US$850m for the Colombian unit of Ominex Resources.

Although small, Friday’s deal highlights Sinopec’s need to add to its upstream production business to compensate for losses in refining.

While international crude oil prices has soared in recent years, Sinopec has been unable to pass on the extra cost to consumers because China imposes price controls on petrol and other refined products. Zhou Yuan, Sinopec vice-president, said that when crude oil prices were at $100 a barrel, Sinopec loses about Rmb2000 ($281) for each ton of petrol it produces. Crude oil in New York traded at $106.05 per barrel on Friday.

Sinopec received $1.26bn in government subsidies in 2005, and $714m in 2006, to compensate for this loss. It is widely expected that Sinopec will again receive government aid this year.

Under Friday’s agreement, a Sinopec unit will form a 60-40 joint venture with AED. The joint company will own oil assets including the Puffin and Talbot fields off north-west Australia. Sinopec will operate the oilfields, which are valued at about A$1bn.