/REUTERS, Singapore/Hong Kong, June 8, 05/ - PetroChina is paying about $3 billion to buy overseas oil and gas fields from its state-owned parent CNPC through a joint venture to boost sagging output, a source close to the deal said.

PetroChina, whose shares are listed in Hong Kong and New York, will set up a 50/50 venture with China National Petroleum Corp. (CNPC), China's dominant oil and gas producer with operations in Latin America, Central Asia and Africa.

PetroChina will likely announce the deal as early as Friday, the source, who spoke on condition of anonymity, told Reuters on Wednesday.

"Their acquisition will be a 50 percent interest in a joint venture of the (two firms') combined international assets," the source said.

Under the deal, PetroChina would not have access to CNPC's assets in Sudan due to political sensitivities surrounding operations in the war-ravaged African state, the source said.

The Sudanese assets accounted for more than half of CNPC overseas portfolio's 12.88 million tonnes of output in 2003.

According to a Deutsche Bank research report in March, Sudan accounts for 52 percent of CNPC's overseas crude reserves of 1.76 billion barrels. Kazakhstan accounted for 30 percent.

PetroChina spokesman Mao Zefeng declined to comment.

PetroChina, which is 90 percent owned by CNPC and counts U.S. billionaire Warren Buffett among its investors, has invited analysts to a presentation on Friday to discuss "the company's latest business development", according to a copy of the invitation letter obtained by Reuters.

PetroChina said in March it might buy multi-billion dollar overseas assets from CNPC. But it did not give details.

The joint venture is aimed at boosting the growth profile of PetroChina, which has few overseas assets and whose oil production at home has been stagnating due to ageing oilfields.

PetroChina said in March it expected its 2005 crude oil output to grow just 1 percent from 2004's 778.4 million barrels.

Based on the Reuters report, Lehman Brothers wrote in a note to its clients that such an acquisition would improve PetroChina's growth profile, and PetroChina would have a sufficiently strong balance sheet to finance the transaction.

The acquisition could add about 4 percent to PetroChina's 2005 oil production, estimated by Lehman Brothers at 106 million tonnes, it said.

PetroChina shares closed 1 percent higher at HK$5.30 in Hong Kong after earlier hitting a record HK$5.40.

The stock had gained more than 10 percent in the past month to Tuesday's close, outperforming a 7.3 percent slide in China's second largest oil firm Sinopec Corp. and a 0.58 percent gain in China's largest offshore producer CNOOC.

"The deal is quite neutral (for PetroChina), It is not a very significant deal without the Sudan assets," said Gideon Lo, analyst at DBS Vickers, who has a "hold" rating on PetroChina.

Assuming PetroChina would own all of CNPC's non-Sudan assets, it would boost PetroChina's reserves by about 5 percent, he said.

Lehman analyst Han-Pin Hsi wrote that he estimated CNPC's total overseas equity recoverable reserves, excluding Sudan, to be 1.5 billion barrels of oil equivalents (BOE). It implies that PetroChina is acquiring CNPC's non- Sudan overseas assets at about US$4.00 per BOE, which is "inexpensive," he said.

Analysts have expressed concerns that an injection of CNPC's Sudan assets would increase PetroChina's risk profile.

Before PetroChina went public in 2000, CNPC had planned to include all its overseas assets in the subsidiary, but it dropped the idea later due to worries that including assets like the Sudanese fields would dent U.S. investors' interest in its stock offer.

[2005-06-08]