Sinochem Group's $1.7 billion into the US shale gas field
Zhuzhou Zhirong Advanced Material Co., Ltd , https://www.zrcarbide.com
The reporter learned from Sinochem yesterday that the company and Pioneer Natural Resources Company ("Pioneer") signed an oil and gas asset purchase agreement on January 30, which will be purchased from Permian, Texas, USA. A 40% interest in a shale oil and gas block in the southern part of the Midland sub-basin.
"This is the first time that Sinochem has entered the US oil and gas upstream field and is the Group's first unconventional oil and gas project." Zeng Xingqiu, former chief geologist of Sinochem Group, told reporters.
The amount paid by Sinochem will be US$1.7 billion, including US$500 million in cash, and will provide Pioneer with 75% of the drilling and completion expenditures in the joint venture area in the next few years, or US$1.2 billion. According to the agreement, Sinochem will acquire an oil and gas development rights of approximately 82,800 acres, and develop all of its underground Wolfcamp shale formations and oil and gas resources of deeper reservoirs.
Sinochem Group said that the transaction will be submitted to the relevant government departments for approval, and delivery is expected to be completed in the second quarter of 2013. Pioneer will be the operator and carry out oil and gas operations such as land leasing, drilling, completion, operation and sales in the cooperation areas.
Zhang Wei, vice president of Sinochem Group, said: "Through this transaction, Sinochem will acquire the high-quality assets of the US shale oil basin and further optimize the portfolio of our foreign investment. We will continue to strengthen cooperation between the two parties in the future."
According to the information disclosed by Sinochem Group, up to now, the shale oil and gas area involved in the above transaction has drilled more than 400 horizontal wells, and more than 35 horizontal well drilling rigs operate in the area, which has great development potential.
In this regard, Zeng Xingqi, who once worked in the region, said that the project is indeed rich in resources, but the development cycle is long and the profitability is not strong.
Zeng Xingqiu said: "Sinochem Group started relatively late in the state-owned oil companies, relatively small scale. This kind of profitable but stable project is more suitable for Sinochem Group, and Sinochem Group can also use this project to enter the United States to learn. And accumulate experience in the development of unconventional oil and gas."
Sinochem Group entered the upstream oil and gas field in 2002 and established Sinochem Petroleum Exploration and Development Co., Ltd. in that year. By the end of 2011, Sinochem had 23 oil and gas contract blocks in 10 countries including China, Brazil, Colombia, United Arab Emirates, Yemen, Tunisia, Ecuador, Peru, Syria and Indonesia.
However, Sinochem’s previous overseas oil and gas project investment was not smooth. According to the report of “China Sinochem Corporation’s 2009 Financial Revenue Audit Results†issued by the National Audit Office in May 2011, by the end of 2009, two of the six overseas oil and gas fields invested and developed by Sinochem were profitable. Not meeting the expected target of the feasibility study, the accumulated net cash flow was less than the forecast of $133 million; the cumulative loss of the three projects was $15,62.62 million.
However, Li Qiang, a spokesperson for Sinochem Group, later responded: “So far, Sinochem’s overseas oil and gas field projects have been profitable overall.â€