Sinopec offers $7.24 billion for Addax Petroleum

Sinopec International Petroleum Exploration & Production Corp. has agreed to pay $7.24 billion in cash for Addax Petroleum Corp., Calgary, providing it with access to assets to West Africa and the Middle East.

Uchenna Izundu
OGJ International Editor

LONDON, June 24 -- Sinopec International Petroleum Exploration & Production Corp. has agreed to pay $7.24 billion in cash for Addax Petroleum Corp., Calgary, providing it with access to assets to West Africa and the Middle East.

Other rumored contenders for Addax included China National Petroleum Corp. and China National Offshore Oil Corp., which failed to secure Unocal Corp. in 2005. Sinopec had also competed with the Korean National Oil Co. for Addax, which has recommended to its shareholders that they accept the offer. Finalizing the deal awaits at least two-thirds Addax shareholder approval as well as relevant regulatory approvals.

Addax executives have committed to sellin their 38% holding in the company to Sinopec under a lock-up agreement. If the deal is not completed in certain circumstances, Addax will pay Sinopec a termination fee of $300 million (Can).

The acquisition represents a change of focus for China, which has been aggressive in buying assets in central Asia and South America. This will be politically sensitive because several small oil companies have signed contracts in Iraqi Kurdistan that the authorities in Baghdad are contesting.

Addax Pres. and Chief Executive Officer Jean Claude Gandur said Sinopec’s support meant that it would see increased investment in the business and acceleration of development and exploration plans.

In June, Addax started exports from Taq Taq oil fields in Kurdistan via the Iraq-Turkey pipeline to the Turkish port of Ceyhan (OGJ Online, June 1, 2009).

This is the second takeover company bid this month involving Iraqi Kurdistan. UK-listed Heritage Oil Corp. said it would merge with Turkey's Genel Energy International Ltd. in a $5.5 billion deal to focus on this region and Uganda. This company would hold net proved and probable reserves of 300 million bbl of oil and multibillion barrel oil potential.

According to a nonbinding memorandum of understanding signed by the parties, the enlarged group would hold a net working interest production of 45,000 b/d by yearend, increasing in the medium term to 90,000 bbl/d from the Taq Taq and Tawke fields in 2011. Once Miran oil field in Kurdistan comes onstream, oil production could be doubled.

The development of the Taq Taq 40,000-b/d refinery in Kurdistan by 2012 will allow increased production by up to 60,000 b/d once the refinery is running at peak capacity.

Contact Uchenna Izundu at uchennai@pennwell.com.

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