CGC buys Sinopec assets in Argentina to increase its oil output
Argentina’s Compañía General de Combustibles, a midsize oil and natural gas producer in Argentina, said June 30 it has acquired the Argentinian business of China’s Sinopec, boosting its total production nearly 40%.
The deal takes the company’s oil and gas output to 50,000 boe/d, CGC said in a statement. That’s up 39.3% from its average output of 39,500 boe/d in the first quarter of this year, according to company data.
The acquisition “reaffirms CGC’s vision of continuing to invest and grow in Argentina,” the Buenos Aires-based company’s chairman and CEO, Hugo Eurnekian, said in the statement. “We are convinced of the enormous and diverse potential offered by the geology of our country, not only in shale but especially in tight and conventional. This step we are taking is proof of that.”
The deal gains CGC 4,600 sq. km (1.1 million acres) in Argentina, most of which is in San Jorge Gulf, a southern basin with mostly conventional and tight plays, and minor amounts in the Cuyana Basin in the western province of Mendoza, where there is mostly conventional and heavy crude. The company also gets a stake in Termap, an operator of two oil exporting terminals in southern Patagonia.
CGC did not disclose the amount of the deal.
Sinopec entered Argentina in 2011, acquiring the assets of US-based Occidental Petroleum, or Oxy, for $2.5 billion, one of the biggest deals ever in the country’s oil sector.
Sinopec invested to boost output to 46,400 boe/d in 2012 from 44,000 boe/d at the time of the acquisition, but output declined to 32,800 boe/d in 2017 as conventional reserves matured in its blocks, and the country’s financial and political volatility made it hard to plan investments for growth.
Indeed, Sinopec has come under pressure from government officials to increase investment on grounds that it was not meeting its contractual obligations. Sinopec’s oil production, for example, has tumbled 63% to 14,250 b/d in April from 38,180 b/d at the end of 2011, according to data from the Argentina Oil & Gas Institute, an industry group.
Sinopec first made steps to pull out of Argentina in 2017, attracting the interest of 12 companies including Argentina’s state-backed YPF, Argentina’s Pluspetrol, Canada’s Madalena Energy and Mexico’s Vista Oil & Gas.
The bids were seen at the time to be at around $600 million for the assets, according to estimates at the time.
CGC is owned by Corporacion America, a holding company with interests in airports, energy and technology. It acquired control of the CGC — the other 30% is owned by Sociedad Comercial del Plata, another local holding company — in 2013, when it was producing 8,500 boe/d.
The subsequent acquisition of the Argentinian assets of Brazil’s state-led Petrobras in 2015 increased its production to 20,000 boe/d, after which it invested to increase output to a record 37,000 boe/d in 2019. CGC has invested more than $1.5 billion in oil and gas projects in Argentina since 2013.
With Sinopec’s assets, CGC’s oil production increases to a 37% share of the total, up from 15% previously, while gas declines to 63% from 85%, the company said.
The deal also increases its proved reserves by more than 50% to 90 million boe from 59 million boe, it added.