China's Sinopec wins Saudi gas block

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Tuesday January 27, 5:09 PM


   China's Sinopec wins Saudi gas block

By Dominic Evans and Chen Aizhu

RIYADH/SINGAPORE, Jan 27 (Reuters) - China's state-owned Sinopec Group
has won a deal to explore and produce gas in Saudi Arabia in the second
of three blocks to be awarded this week, industry sources said on Tuesday.

The award of Block B, measuring about 38,000 square kilometres, follows
Monday's announcement that Russia's LUKOIL had won an auction for rights
to find and pump gas in the 29,900 square km Block A.

Officials at Saudi Arabia's oil ministry were not immediately able to
confirm Tuesday's deal but a Sinopec official said Saudi Arabia's
state-owned Saudi Aramco would hold a 20 percent stake in the venture.

Sinopec International Petroleum Exploration and Production Corp, a
Beijing-based unit of Sinopec Group, would own the remaining 80 percent,
he said.

He declined to give Sinopec's estimate for gas reserves but said the
deal set an exploration period of 10 years.

Results of bids for a third, 51,400 square kilometre block, which
Sinopec is also competing for, will be revealed on Wednesday.

Both Saudi officials and international oil companies have stressed that
this week's auctions have been decided on precise technical criteria and
say the assessment of bids has been transparent and open to all
competitors.

STRATEGIC ALLY

But the success of Russian and Chinese firms could also help Saudi
Arabia forge closer cooperation with the world's second biggest oil
exporter and fastest growing market.

Saudi Aramco has a 25 percent stake in a planned $3 billion refinery and
petrochemical venture led by Sinopec. It is China's largest crude
supplier and also looks to supply China's planned strategic oil reserve.

Saudi Oil Minister Ali al-Naimi said at this year's economic forum in
Davos that his country's ties with Beijing were likely to get stronger.

"China is actually becoming quite a strategic ally for us in the energy
business," he said. "They want to come upstream in Saudi Arabia. They
are welcome, and we want to be downstream in China, where we are welcome."

Riyadh presented the three areas totalling 120,000 square kilometres
last summer in a bid to reignite investor interest in gas exploration
after the collapse of its $25 billion natural gas opening.

Saudi Aramco will be a partner in each of the three areas in the South
Ghawar region, which roughly cover the acreage originally offered to
Exxon Mobil in negotiations that broke down last year.

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