China state firm to buy Chevron Bangladesh oil fields

China state firm to buy Chevron Bangladesh oil fields

SAM Staff,

Chevron Corp. has signed a preliminary deal with China’s Zhenhua Oil, a state-run oil and gas explorer, to sell its major natural gas fields in Bangladesh for about $2 billion, Reuters reported, citing Beijing-based oil executives. Bangladesh, with rights of first refusal on those gas fields, could scupper the deal, as its national oil company Petrobangla is trying to drum up financing to purchase them, the report said, citing sources. A spokesperson for Zhenhua Oil, Zhang Xiodi, declined to comment to Reuters. A spokesperson for Chevron could not immediately be reached for comment.

Zhenhua Oil is a small oil and gas explorer that despite its connections to China’s defense industry is dwarfed in comparison to state energy giants PetroChina (0857.HK) and Sinopec (0386.HK). It is trying to formalize its deal with Chevron by June, after the two companies signed a preliminary pact in January, the two senior oil executives told Reuters.

Chevron, in an e-mailed statement, confirmed that it was in commercial discussions on its Bangladesh assets, but would not comment further as a matter of policy. Chevron, which is the largest foreign investor in Bangladesh’s energy sector, operates the Bibiyana, Jalalabad and Moulvibazar gas fields and sells all the production to state oil company Petrobangla.

According to The Daily Star, a local newspaper, In 2015 Chevron had a net daily production averaged 720 million cubic feet of natural gas, which is about one-third of the total production of Bangladesh. It also produced 3,000 barrels of natural gasoline.

Bangladesh is in the process of hiring global energy consultant Wood Mackenzie to assess the fields’ reserves before placing a formal bid to buy the assets, two Bangladesh sources familiar with the matter told Reuters.

The Bangladesh sources said they were not aware of Zhenhua Oil’s competing interest in the Chevron fields. Nasrul Hamid, state minister for power, energy and mineral resources was asked if Bangladesh would try to block the China deal, “This is Chevron’s matter. We’ll not interrupt but we are supposed to get the first priority,” he said.

Zhenhua Oil has oil and gas operations in Iraq, Kazakhstan, Syria, Myanmar and Egypt.

Compiled by SAM staff