CNOOC buys Indonesian oil fields


The stake is a boost for Indonesia, where fighting last year with rebels in Aceh forced ExxonMobil to shutter its gas plant

By Alex Frew McMillan

HONG KONG, China -- Chinese oil producer CNOOC Ltd. has agreed to pay $585 million for the Indonesian oil operations of Repsol-YPF.

The cash deal is the company's largest investment outside China. It makes CNOOC the largest offshore oil producer in Indonesia.

CNOOC is buying nine subsidiaries from Repsol that operate in five oil and gas fields.

Because most of the operations are offshore, CNOOC should be spared if Indonesia suffers a repeat of the political turmoil last year that made life almost impossible for multinationals working there.

"This is a good strategic move, capitalizing on our offshore expertise," CNOOC chairman and CEO Wei Liucheng said, in a release.

Boosting production by 17 percent

The deal should boost the company's production by around 17 percent, according to Standard & Poor's. CNOOC says it is buying working reserves that are estimated at 360 million barrels of oil equivalent.

The Chinese company will make Southeast Sumatra PSC a subsidiary, after buying 65 percent of the field. It will have a 50 percent stake in the Poleng TAC field and a minority stake in the other three fields.

Repsol, based in Spain, is looking to concentrate on its operations in South America and North Africa and reduce its debt.

CNOOC Ltd. is the public wing of state-owned China National Offshore Oil Corp., China's third-largest oil producer, after No. 1 PetroChina and No. 2 Sinopec.

Its stock is traded in Hong Kong and New York. It was up 1.9 percent at HK$7.95 on Monday afternoon in Hong Kong. Its stock also rose after the deal was announced on Friday.

Indonesia is one of the 11 members of OPEC, the Organization of the Petroleum Exporting Countries, a cartel that effectively sets limits for world oil production.

But Indonesia has struggled to attract overseas investment due to economic and political turmoil.

ExxonMobil was forced to shutter its gas operations in troubled Aceh province last year because the company couldn't guarantee workers would be safe. It has since resumed production, but demonstrations and shooting deaths continue in the region.

China, which reestablished diplomatic ties with Indonesia in the 1990s, has been strengthening its influence in Southeast Asia.