Posted on July 1, 2010 - by Venik

BP aims to raise $9bn from sale of South American assets to China

• CNOOC eyes 60% stake in Pan American Energy
• Cash would help BP meet liabilities from Deepwater Horizon oil spill
• Russian joint venture TNK-BP also wants to buy BP assets

China looks poised to help bail out BP by buying up to $9bn (£6bn) worth of energy assets in South America, raising vital money for the British oil company to pay bills from environmental liabilities in the Gulf of Mexico.

Russian management of the TNK-BP joint venture, based in Moscow, has also said that it would like to buy more assets from the beleaguered company in other parts of the world.

China National Offshore Oil Corporation (CNOOC) is understood to have expressed an interest in buying the 60% stake held by BP in Pan American Energy, Argentina’s fastest-growing oil and gas group.

CNOOC recently bought a 20% stake in Pan American Energy for $3bn and is apparently keen to increase that holding to 80% through a deal with BP, which considers the assets “non-core”.

The Chinese oil companies – partly state-owned – have been avid buyers of energy assets around the world in an effort to feed the country’s rapid industrialisation programme. The Kremlin has also made no secret of its desire to see Russian oil companies spreading their influence worldwide.

BP, which declined to comment last night on any talks with China or Russia, announced plans to sell $10bn in assets worldwide to help pay for claims and other demands made in the aftermath of the oil slick from the Deepwater Horizon rig explosion in the Gulf of Mexico in April.

CNOOC has even been tipped as a potential buyer of the wider BP group should its financial position worsen, although the Chinese could be expected to be barred from purchasing BP’s huge American assets. A move by CNOOC in 2007 to buy Unocal Corporation was scuppered by political uproar in Washington at the idea of US energy assets being controlled from communist China.

With its share price halved in little more than two months, BP has been determined to extract a good value for its properties and not to become involved in a fire sale amid speculation that it could eventually be driven out of business.

The company has been making determined efforts to bolster its finances by increasing its bank borrowings from $15bn to $20bn and has been considering a bond offering. Any bond move is unlikely to take place until after 27 July, when BP will unveil its second-quarter financial results and give more details on its cash and liabilities position.

Shares in BP rose 6% yesterday after suggestions that the operation to cap the oil leak could soon reach a successful conclusion. A relief well is now close to making contact with the leaking shaft, while a free-standing “riser” that could siphon much more escaping oil into a safe place should be fitted next week.

Fadel Gheit, oil analyst with Oppenheimer & Co, said the improvement in the BP share price was based on a feeling that there was some good news around the corner after so much misery.

“The perception is that the relief well is ahead of schedule and should be successful by the end of this month,” he said. “I believe it is a smart strategy for BP to raise extra money from banks at this time. They have enough liquidity on the balance sheet and may pay more but it’s always better to have more money than you need.”

The clean-up operation is now being headed by BP’s former Russian boss, Bob Dudley, who is building a team as part of the newly created Gulf Coast Restoration Organisation.

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