Statoil, CNPC in Talks to Swap Oil, Gas Assets

ZHENGZHOU Apr 26, 2007 (Dow Jones Newswires)

Norway's Statoil ASA (STO) is in talks with China National Petroleum Corp. to swap stakes in some of its Norwegian oil and gas fields for assets in China, a senior company official said Thursday.

Such a deal would give CNPC a presence in Western Europe for the first time. Most of its overseas operations are currently in frontier areas, such as Sudan in Africa or Venezuela in South America, where a combination of close political ties between government sponsors and cheap Chinese labor have given it an edge over its competitors.

Kristen Kjeldstad, managing director of Statoil's China unit, said the company was also looking at partnering with CNPC on a liquefied natural gas project in the Middle East that would most probably supply China with the cleaner fuel.

A CNPC spokesman declined to comment on the issue.

Statoil is keen to find new assets in China given decreasing crude oil production at its Lufeng 22-1 field in the South China Sea some 250 kilometers southwest of Hong Kong.

The field, which it operates in partnership with Cnooc Ltd. (CEO), was due to reach the end of its life in 2004 but has been extended due to the drilling of new wells and use of new technology. So far it is unclear how long the extension will be.

Earlier this year, Statoil signed a memorandum of understanding forging a strategic partnership with CNPC, which is China's biggest oil producer by any measure. Exact details on the types of projects being considered were unavailable at the time.

Kjeldstad said the two sides were discussing "concrete proposals" and the catalyst was the proposed merger of Statoil and Norsk Hydro ASA (NHY), which is due to take place in October.

"The merged company will potentially have too big a share in some licenses (for fields) in Norway," Kjeldstad said. "We will have to look at ways of diluting our shares."

He said that in order to meet the requirements of Norwegian regulators, Statoil would likely offer a portion of the enlarged company's interests to CNPC and that this was already being discussed.

Kjeldstad declined to reveal the location of the LNG project under discussion with CNPC but said it was unlikely to be Iran, where reports say CNPC is looking at developing the SP14 block in the South Pars gas field.

CNPC's listed unit PetroChina Co. (PTR) wants to build LNG terminals at Dalian in the northern province of Liaoning and Tangshan in Hebei province.

Kjeldstad also confirmed that the company remained interested in becoming involved in the development of PetroChina's Luojiazhai gas field in Sichuan province, although rivals were also in the frame.

The Luojiazhai gas field is PetroChina's major gas field in southwest China with 58 billion cubic meters of proven reserves. But it is known for its harsh, mountainous terrain and PetroChina has limited technology to ensure safe gas production. Several serious production accidents have occurred there in the past few years.

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