Two subsidiaries of the State-owned China National Petroleum Corp (CNPC), China National Oil and Gas Exploration and Development Corp (CNODC) and CNPC (Hong Kong) Ltd, agreed to pay US$26 million each to buy a 30 per cent stake from the European Bank for reconstruction and development of two oilfields in Azerbaijan.

The purchase came just a week after rival CNOOC, the nation's third largest oil giant, finalized a US$600 million acquisition stake in five oilfields in Indonesia from the Spanish oil giant, Repsol-YPE, one of the largest European oil companies.

"The investment in the largest existing onshore oil operation in Azerbaijan is a major step in establishing CNODC's presence in the high profile Caspian region," Zhou Jiping, president of CNODC, was quoted by Reuters as saying.

Analysts said the current low oil price has given Chinese companies leverage for overseas acquisition.

China has listed Central Asia and Russia as its first priority for tapping oil resources abroad, to bridge the yanking oil shortage.

Oil imports account for almost one-third of China's total oil consumption. It is estimated that in the coming 10 years, domestic demand for oil could rise by 4 per cent annually, while production will increase by only 1.3 per cent a year. The purchase also marks China's wish to diversify its oil supply bases as the Middle East provides 60 per cent of China's oil imports.

The two Azerbaijan oilfields, Kursangi and Karabagli block, are located in the onshore Kura Basin, which lies between the Caspian Sea and the Black Sea in Azerbaijan and Georgia. The block covers approximately 470 square kilometres.

The two companies did not say how much of the oil they could obtain.

Last year, CNPC produced 16.2 million tons of crude oil, and 930 million cubic metres of natural gas in overseas reserves in which it enjoys some working interests. The overseas production, mostly in North Africa, the Middle East and South America, has increased by some 20 per cent, and brought US$100 million in profit to the company.

CNPC's chairman, Ma Fucai, said the company is eyeing Russia, Libya, Algeria, Syria, Iran and Myanmar for more opportunities.

"We would explore the possibilities of acquiring, merging, and share participation in seeking more oil reserves abroad," said Ma.

The company hopes to double its overseas oil production to 35 million tons by 2005.

(China Daily January 25, 2002)