Chinese state-held company Zhenhua Oil has signed a preliminary agreement to buy Chevron's natural gas fields in Bangladesh estimated to be worth around US$2 billion, Reuters reported on Wednesday, quoting two Chinese oil industry executives.
Zhenhua Oil, a small oil and gas exporter, is a unit of China's defense industry conglomerate Norinco.
According to the Reuters sources, Zhenhua Oil signed the preliminary deal with the U.S. major in January, and is now trying to finalize the deal by June this year. Zhenhua Oil is said to be partnering with state-backed investment vehicle China Reform Holdings Corp, with Zhenhua to hold 60 percent of Chevron's Bangladesh assets and China Reform, 40 percent.
"Possibly because Zhenhua is a state-owned company and has the backing of China Reform, that's why it was picked by Chevron," one of the oil executives told Reuters.
Chevron, via its subsidiaries in Bangladesh, produces natural gas and condensate from three fields in the northeast of the country. Last summer Chevron was said to be selling US$5 billion worth of assets in Asia as part of a plan to raise US$10 billion total through global asset sales. At that time, the Bangladesh assets were not up for sale.
However, in October a Chevron spokesperson told UPI that although the U.S. company had not made a decision to sell the Bangladesh interests, it would proceed with a possible sale only "if we can realize attractive value for Chevron".
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The Zhenhua Oil-Chevron preliminary deal could, however, be blocked by Bangladesh, which holds the right of first refusal on the assets, Reuters says.
Bangladesh is hiring an international company to assess the reserves of Chevron's gas fields and will approach the U.S. company with an offer after the asset appraisal is complete, Bangladesh's state minister for power, energy and mineral resources, Nasrul Hamid, told Reuters at the end of January.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More