Oil consortium buys EnCana Ecuador assets
By Wang Ying (China Daily)
Updated: 2005-09-16 08:38

China's top oil companies yesterday confirmed EnCana's sale of its Ecuador assets to a consortium led by China's top two oil giants, for US$1.42 billion.

The consortium, called 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, said a CNPC senior official 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 refused to 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 Corp said on Wednesday in a statement that it had reached an agreement to sell its shares in subsidiaries with oil and pipeline interests in Ecuador to Andes Petroleum Company, a joint-venture of Chinese petroleum companies, for approximately US$1.42 billion.

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

The sale became effective on July 1, and is expected to close before the end of this year, the statement added.

"It (the sale) is about concentrating our efforts and investment where we have clear competitive advantages we have reached agreements to divest of 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 include India's Oil & Natural Gas Corp (ONGC), who was 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 may be drawing on lessons learned from CNOOC's failed buyout 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.

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