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Oil Consortium Buys EnCana Ecuador Assets

A consortium of China's major oil companies yesterday confirmed its purchase of EnCana Corp's Ecuador assets for US$1.42 billion.


The consortium, Andes Petroleum Company, includes China National Petroleum Corp (CNPC) and China Petrochemical Corp (Sinopec Corp), the parent companies of Hong Kong-listed PetroChina and Sinopec respectively, a CNPC senior official said yesterday.


"We are in the joint venture for the acquisition (of EnCana's Ecuador assets), which also includes Sinopec Corp," Liu Weijiang, CNPC spokesman for overseas acquisition yesterday told China Daily.


Liu didn't give further details.


The country's third largest oil and gas producer, China National Offshore Oil Corp (CNOOC) was not immediately available for comment.


Calgary-based EnCana said in a statement on Wednesday that it had reached an agreement to sell its shares in subsidiaries with oil and pipeline interests in Ecuador to Andes.


The CNPC and Sinopec Corp-led consortium will acquire assets that are able to produce some 75,200 barrels per day and have proven reserves of 143 million barrels, as well as a 36 percent stake in OCP Pipeline, which is able to pump 450,000 barrels of oil per day, according to the EnCana statement.


"It (the sale) is about concentrating our efforts and investment where we have clear competitive advantages. We have reached agreements to divest more than US$10 billion in non-core assets," said Gwyn Morgan, president and CEO of EnCana, one of North America's largest holders of gas and oil resources.


The bidders for EnCana's Ecuador assets also included India's Oil & Natural Gas Corp (ONGC), who were also outbidded by CNPC in buying Canadian-registered PetroKazakhstan less than a month ago, according to a Reuters report.


Industry insiders said the coming together of China's oil companies in bidding for foreign assets this time might be drawing on lessons learned from CNOOC's failed acquisition of Unocal last month amid strong political opposition from the United States.


"The joint venture by the Chinese oil companies in buying EnCana's Ecuador assets means considerably fewer risks, compared with CNOOC's individual deal for Unocal," said a senior official from PetroOverseas who declined to be identified yesterday.


Liu Gu, a senior analyst with Guotai Jun'an Securities (Hong Kong) Ltd, said the deal would not have a great impact on the listed prices of PetroChina and Sinopec, since "the acquired oil and pipeline assets only make up a small proportion of their total portfolio."


Shares of EnCana on Wednesday fell 35 Canadian cents (29.7 US cents) to 58 Canadian dollars (US$49) in Toronto Stock Exchange trading.


(China Daily September 16, 2005)

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