China’s state-run Zhenhua Oil has signed a preliminary agreement with Chevron to buy the US oil major’s natural gas fields in Bangladesh worth about US$2 billion, Reuters reports.
Zhenhua is a subsidiary of China’s defense industry conglomerate NORINCO. A completed deal would mark China’s first major energy investment in the South Asian country, where Beijing is competing with New Delhi and Tokyo for influence.
Bangladesh, though, holds the right of first refusal on the assets and could block the transaction. The country, via its national oil company Petrobangla, is keen to buy the gas fields and is talking to international banks to raise financing, according to a banking source familiar with the process.
Bangladesh is in the process of hiring global energy consultant Wood Mackenzie to assess the fields’ reserves before placing a formal bid to buy the assets, two Bangladesh sources familiar with the matter told Reuters.
The Bangladesh sources said they were not aware of Zhenhua Oil’s competing interest in the Chevron fields.
"As this project is in the process of commercial discussions, we can’t comment based on our company policy," said Zhang Xiaodi, Zhenhua Oil’s spokesman.
Zhenhua Oil is a small oil and gas explorer that despite its connections to China’s defense industry is dwarfed in comparison to state energy giants PetroChina and Sinopec. It is trying to formalize its deal with Chevron by June, after the two companies signed a preliminary pact in January, the two senior oil executives told Reuters.
Zhenhua will partner with China Reform Holdings Corp Ltd, an investment vehicle under the State-owned Assets Supervision and Administration Commission. Zhenhua will hold 60 percent of the deal and China Reform 40 percent, the two executives said.
The executives declined to be named as these discussions were not public.
