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China’s oil majors bid to buy reserves

01 June 2008

China’s leading oil companies plan to make considering investments in Canada’s Talisman Energy, Australia’s Santos and Spain’s Repsol, according to theHong Kong newspaper South China Morning Post.

The report also suggested that China National Offshore Oil, China’s third-largest oil company, was in talks that could lead to asset sales or a complete take-over of Talisman, Canada’s third largest oil exporter. A more ambitious grab for Talisman, which has a market capitalisation of $20 billion, is definitely the size of transaction China is looking for to boost its oil reserves.

Talisman said it would sell operations in the Netherlands, Trinidad and Denmark, raising about $2 billion and allowing it to focus on higher quality assets.

China’s largest oil firm PetroChina is also considering taking a holding in Santos, Australia’s third biggest oil and gas producer. PetroChina is also interested in a deal with Repsol, which is considering restarting the sale of its Latin American assets that could be valued at $10 billion, according to unnamed sources

Iran is also in talks with Repsol over its involvement with the development of the offshore South Pars gas field. Repsol and Shell want to switch their current commitment to other phases for later development because of rising development costs.

Iranian officials have urged the company to take a decision by June 2008 in order to avoid a replacement by other
companies in the gas deal. However they later denied such an ultimatum. In January 2007, the US government apparently told Shell and Repsol, which both have major interests in the US, that their project in Iran would probably infringe US law.

The South Pars field holds about 8% of world gas reserves.

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