Under the terms of the Agreement, Sinopec has paid Synenco $38 million cash for an approximate 14.5 per cent interest in the Northern Lights Project's assets. Synenco then contributed its remaining interest in the Northern Lights Project's assets into Northern Lights Partnership (NLP) in return for a 60 per cent interest in NLP. Sinopec contributed its acquired interest and cash of approximately $111.7 million into NLP in return for a 40 per cent interest in NLP. Synenco retains a 60 per cent share, will be the operator of the Northern Lights Project, and the managing partner of the Partnership.
The Northern Lights Project is an integrated oil sands mining, bitumen extraction and upgrading project, located northeast of Fort McMurray, Alberta, with design capacity of over 100,000 barrels per day of synthetic crude oil. Total project costs, to be incurred over a five-year period, are currently estimated at $4.5 billion.
This transaction has received all required Canadian and Chinese government approvals.
"Sinopec is committed to the long-term development of the project in Canada, and we are very pleased to be a partner in its evolution," said Mr. Mou, Chairman of the Board of Directors, Sinopec International Petroleum Exploration and Production Corporation (SIPC).
Mr. Mou noted that Sinopec has established international upstream, downstream and petrochemical business and technology partnerships with a number of global oil companies such as ExxonMobil, BP, Shell, BASF, Saudi Aramco, and ConocoPhillips.
Jim Donnell, President and Chief Executive Officer of Synenco, said Sinopec's investment will be a catalyst to advance the Northern Lights Project.
"We are excited about this partnership and look forward to a long-term relationship," Mr. Donnell stated. "Sinopec shares our strategic vision, possesses the financial strength, has extensive crude oil production and downstream experience, and brings upgrading expertise essential for this project."
Mr. Donnell noted that the Northern Lights Project will be an economic stimulus for Alberta that will utilize the best technology and skills from China and Canada. "Our two companies bring complementary strengths that together will allow the Northern Lights Project to proceed in an innovative, energy-efficient and environmentally responsible manner," he said.
Synenco was formed in 1999 to evaluate lands in the Athabasca oil sands region. In 2003, the Company's focus evolved from exploration to development with the overriding goal of making the Northern Lights Project economically viable, technically feasible and capable of ultimately producing 100,000 barrels per day of high quality synthetic crude oil.
SIPC is a subsidiary of China Petrochemical Corporation (Sinopec Group) and sister company of internationally listed China Petroleum and Chemical Corporation (Sinopec Corp). Sinopec is China's second largest crude oil and natural gas producer, largest refiner and marketer of oil products, and largest petrochemicals company. CIBC World Markets advised SIPC on this transaction.
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