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Sinopec Hits First Oil in Niger Delta

Published on Wednesday 14th July 2010 Sinopec Hits First Oil in Niger Delta

China oil giant, Sinopec, has struck oil in its first exploration well drilled in Nigeria's Block 137, previously owned by Canadian oil giant, Addax Petroleum.

According to Reuters report, the Udele-3 well of Block 137, in the Niger Delta, was the first exploration well Sinopec drilled in Nigeria this year after its acquisition of Swiss oil and gas explorer Addax almost a year ago.

The report quoted China PetroChemical News, Sinopec's in-house newspaper as saying that the well intercepted an oil column of 45.9 metres and flowed 3365 barrels of oil and 28,300 cubic metres of gas per day during test.

Last June, Sinopec set out to acquire Addax for $7.24 billion to gain access to oil assets in West Africa and Iraq.

The acquisition was sealed at CA$52.80 per share on June 24, Sinopec said in a statement, without commenting on the total value of the offer.

Following the acquisition, the board of directors of Addax Petroleum were replaced by nominees of Sinopec International, with Addax's chief Jean Claude Gandur remaining as a director of Addax Petroleum.

Addax holds assets in Nigeria, Cameroon and Gabon with a combined 538 million barrels of proven and probable oil reserves as of the end of last year. The company's crude output stood at 134,700 barrels per day in the first quarter of this year.

Until recently, Sinopec, Asia's largest refiner by capacity, has relied heavily on oil refining and marketing for its earnings. Sinopec imports more than 70 per cent of the crude oil run through its refineries, which has exposed it to heavy losses in past years as it wasn't able to recoup surging crude-oil costs in full from consumers.

To broaden its earnings base and go overseas, the refiner is actively seeking overseas investments in oil and gas resources as part of its expansion plan. Sinopec said in August it had set up a unit to review overseas acquisition opportunities including assets in Angola, Russia, Kazakhstan and Australia now held by China Petrochemical.

"Through this overseas asset acquisition, Sinopec not only obtains a large-scaled overseas oil and gas asset, but also attains and absorbs relevant experiences in human resource, management system and business operation in overseas upstream operations," Reuters quoted the company Secretary Chen Ge as saying recently.

"The transaction will help improve the financial performance of Sinopec and maximize the long-term investment value for the shareholders," he added.

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