Zhenhua Oil, a subsidiary of Norinco, the Chinese state weapons manufacturer is competing with Hengli Group for a 4% stake in Abu Dhabi National Oil Corporation (Adnoc), according to an unnamed source familiar with the matter, cited by Reuters on September 5th.
The 4% stake is up for sale after CEFC China Energy has been selling debt-laden assets over the past few months as part of the Chinese Government’s plan to mitigate private sector debt, according to Reuters, citing unnamed sources.
CEFC’s creditors have over the past months been conducting sales of the debt-laden conglomerate’s global assets, including stakes in oil and gas fields in Abu Dhabi and Chad, and properties in Europe and Shanghai.
The most likely buyers appeared to be state-owned China North Industries Group Corporation (Norinco), through its subsidiary Zhenhua Oil and the Hengli Group, owned by the wealthiest man in Jiangsu, as reported by the South China Morning Post.
Norinco, a state-owned company based in the Chinese capital, is one of the world’s biggest defence contractors. It was put under sanctions for two years by the US government in 2003 for selling weapons to Iran. The company also has a non-military subsidiary in China Zhenhua Oil Corporation, which is engaged in oil exploration and production.
According to Reuters, Zhenhua Oil has been looking to expand its reserve base, however its activities had so far been focused on Iraq.
Norinco’s General Manager Yin Jiaxu visited Abu Dhabi in late April when he met with emirate’s Crown Prince Mohammed bin Zayed bin Sultan al-Nahyan to discuss military cooperation.
Also reported by Reuters, Hengli Group, parent of Hengli Petrochemical, started looking at the stake in the oilfields “recently” after supposedly being approached by the China Development Bank, which is leading a team of creditors to repay CEFC’s heavy debts after the arrest of chairman Ye Jiemin in early 2018. “(Hengli) is very cautious about venturing into a totally unfamiliar business, especially before the start-up of the (Dalian) petrochemical project,” said an executive with knowledge of the discussions, cited by Reuters.
Reuters further reported that Hengli Petrochemicals is slated to run tests on a new $11 billion refining and petrochemical complex in Dalian in October 2018. The polyester group, started up by Jiangsu province entrepreneur Chen Jianhua, has no experience in oil and gas exploration.
The unnamed source cited by South China Morning Post reported that Citic Group, the biggest among China’s state conglomerates, and a buyer of CEFC’s assets in the Czech Republic withdrew from making an offer, after having conducted due diligence on the Abu Dhabi company stake.
According to South China Morning Post, a 4% stake in Adnoc could entitle the buyer to more than 3.2 million tonnes of crude oil per year at the current level of production. If the output were to increase, the amount could reach 4 million tonnes per annum.