The deal will help the firm to set up a second production base in Africa

BEIJING - CNOOC Ltd, a listed subsidiary of the biggest domestic offshore oil explorer China National Offshore Oil Corporation (CNOOC), is foraying into oil-rich Uganda to further expand its footprints in Africa.

The marine oil company said on Wednesday that it inked a deal with UK-based Tullow Oil Plc to acquire a one-third stake in the latter's three exploration blocks in Uganda's Lake Albert Basin for $1.47 billion.

The transaction, which is expected to be completed by the first half of this year, is still subject to regulatory approvals from Ugandan and Chinese authorities. France-based Total SA will have another one-third stake in the three blocks, according to CNOOC Ltd.

The move, which follows CNOOC Ltd's first big foreign transaction in Nigeria in 2006, is expected to help the company set up its "second major production base in Africa," said Li Fanrong, the company's president.

Fu Chengyu, chairman of CNOOC, said in February that the company's investment during the 12th Five-Year Plan period (2011-2015) will reach up to 1 trillion yuan ($152.7 billion), part of which will be spent in overseas expansion.

CNOOC Ltd said the oil production rate of the Lake Albert Basin will eventually exceed 200,000 barrels a day.

"It's a good deal for the company in terms of investment returns. Its partnership with Total SA and Tullow will also help the company to reduce risks in the country," said He Wei, a senior analyst at BOCOM International Holdings Co. According to He, CNOOC Ltd's overseas oil production accounts for about 20 percent of the company total to around 9 million tons a year.

As such, the newly acquired blocks in Uganda, which are projected to produce additional 3 million tons of oil for the company, will make its overseas oil production grow by more than 30 percent, He said. Shares of CNOOC Ltd in Hong Kong edged up 0.72 percent to close at HK$19.6 ($2.52) on Thursday.

The State-owned oil companies in China have accelerated their attempts to get more oil and gas resources overseas because of surging domestic demand.

The National Development and Reform Commission, China's top economic planner, said on Wednesday on its website that it has given a nod to three oil and gas overseas acquisitions by China Petroleum & Chemical Corp (Sinopec) and CNOOC.

The approvals include Sinopec's acquisition of Spain-based Respol's deepwater oil assets in Brazil for $7.1 billion, and CNOOC's $49 million deal to take a 50 percent stake in Australia's Exoma Energy Ltd for coal seam and shale gas.

The country's oil and natural gas equity production overseas rose almost 40 percent year-on-year to a record high of 70 million tons of oil equivalent in 2010, according to a research arm of China National Petroleum Corp, the country's biggest oil and gas producer by volume.

China Daily

(China Daily 04/01/2011 page17)