BEIJING/DHAKA: China’s state-run Zhenhua Oil has signed a preliminary deal with Chevron to buy the US oil major’s natural gas fields in Bangladesh that are worth about $2 billion, two Beijing-based Chinese oil executives said.
Zhenhua is a subsidiary of China’s defense industry conglomerate NORINCO. A completed deal would mark China’s first major energy investment in the South Asian country.
Bangladesh, though, holds the right of first refusal on the assets and could block the transaction. The country, via its national oil company Petrobangla, is keen to buy the gas fields and is talking to international banks to raise financing, according to a banking source familiar with the process.
Bangladesh is in the process of hiring global energy consultant Wood Mackenzie to assess the fields’ reserves before placing a formal bid to buy the assets, two Bangladesh sources familiar with the matter told Reuters.
The Bangladesh sources said they were not aware of Zhenhua Oil’s competing interest in the Chevron fields.
“As this project is in the process of commercial discussions, we cannot comment based on our company policy,” said Zhang Xiaodi, Zhenhua Oil’s spokesman.
Zhenhua Oil is a small oil and gas explorer that despite its connections to China’s defense industry is dwarfed in comparison to state energy giants PetroChina and Sinopec. It is trying to formalize its deal with Chevron by June, after the two companies signed a preliminary pact in January, the two senior oil executives told Reuters.
Zhenhua will partner with China Reform Holdings Corp. Ltd., an investment vehicle under the State-owned Assets Supervision and Administration Commission (SASAC). Zhenhua will hold 60 percent of the deal and China Reform 40 percent, the two executives said.
The executives declined to be named as these discussions were not public.
Chevron, in an e-mailed statement, confirmed that it was in commercial discussions on its Bangladesh assets, but would not comment further as a matter of policy.
Bangladesh knows that Chevron is in talk with global companies, but has no specific knowledge about Zhenhua’s interest, said Nasrul Hamid, state minister for power, energy and mineral resources.
“This is Chevron’s matter. We will not interrupt but we are supposed to get the first priority,” he said when asked if Bangladesh would try to block the China deal.
“We will place a formal bid only if the project is viable,” Hamid said.
If the Bangladesh deal materializes, it would hand the Chinese firm 16 million tons a year of oil equivalent output, including natural gas and condensate, a scale that would make it China’s fourth-largest oil and gas producer, the two Chinese executives said.