China eyes Repsol assets

Published on July 3, 2009 by brooks | This story has been viewed 77 times

Two of China’s biggest oil groups have approached Repsol YPF, the Spanish oil company, over possible asset purchases and joint ventures worth billions of dollars, according to people familiar with the matter.

If successful, the Chinese proposals could lead to the largest outward investment deals undertaken by Chinese companies, which are eager to gain access to natural resources to fuel China’s economic growth.

Repsol is discussing the possible sale of its 75 per cent stake in YPF, the Argentinean company that accounts for two thirds of the Spanish group’s global oil production, to CNPC, parent of listed PetroChina, in a deal that could value YPF at $17bn.

CNOOC, meanwhile, has discussed with Repsol a proposal that could lead to the Chinese group investing at least $15bn in a joint venture that would house some of Repsol’s main exploration and production assets outside Argentina. CNOOC is also interested in a minority stake in YPF alongside CNPC.

“The Chinese groups have been talking to Repsol for months about acquiring assets,” said one person with knowledge of the negotiations. “The discussions and due diligence are advanced.”

Yesterday Repsol confirmed it had received approaches to buy part of YPF in a putative deal that could ultimately help shore up the finances of some of Repsol’s Spanish shareholders.

In a vaguely worded announcement, Repsol reiterated its desire to sell part of its YPF stake, possibly through a public share offering. “Repsol wants to make it known that it has received various proposals from different companies, al-though none of them is firm,” it said in a statement issued via the market regulator in Spain.

Repsol declined to comment directly on CNOOC, but said of the other approach: “We’re not in any formal discussions with CNPC.”

The Chinese groups have in recent weeks stepped up discussions about the possible deals with the National Development and Reform Commission, an all-powerful Chinese body that can block outbound investment it deems not to be in the national interest. “The reaction at the NDRC has been positive,” said one person familiar with the discussions. “These potential deals fit the Chinese strategy to secure energy supplies.”

The Chinese groups were not working in tandem, said people familiar with the matter. However, the need to seek NDRC guidance effectively meant that CNPC and CNOOC were co-operating on how they approached Repsol.

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