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Sinopec enters the U.S. oil market

www.chinanews.cn 2005-01-25 13:44:39

Chinanews, Jan. 24 - As the second largest crude oil importer in the
world, China has to expand its original sources of supply in the
international oil market. In the process of doing so, China needs to
carefully assess the situation and appropriately handle its relationship
with other big oil importers such as the United States.
More than a year ago, the Sinopec International Petroleum Exploration &
Production Corporation (SIPC) successfully purchased the First
International Oil Corporation of America (FIOC), thereby acquiring FIOC's
six wholly-owned and partly-owned subsidiary companies in Kazakstan, as
well as FIOC's oil exploration land area measuring 26,000 square
kilometers.
Recently, Sinopec completed the restructuring of FIOC after acquiring it,
and also commenced full-scale operations in the oil exploration regions
in Kazakstan.
Kazakstan has the most abundant oil reserves among the newly-independent
countries in Central Asia, with a proven reserve of 2.4 billion tons on
land and 7 billion tons in the continental shelf of the Caspian Sea. The
FIOC oil regions which have been acquired by Sinopec are located around
the Caspian Sea coastal areas. According to the results of a seismic
survey, these regions have excellent prospects for oil exploration and
exploitation.
Founded in 1996, FIOC is a private, non-listed company. Its headquarter
is in Houston in the United States and a branch has been set up in
Alma-Ata, Kazakstan's former capital . In the oil regions around the
Caspian Sea in northern Kazakstan, it has five oil exploration clusters
and an oilfield which produces more than 200,000 tons of oil annually.
In order to avoid U.S. governmental, legal and tax risks and restrictions
on its acquisition of American companies, Sinopec has resorted to
offshore strategies, including registering a new company in Bermuda and
executing the acquisition of U.S. companies under the jurisdiction of
Bermuda. On April 19, 2004, SIPC incorporated a wholly-owned subsidiary
named First International Oil Co., Ltd in Bermuda, an international tax
haven, and used this subsidiary for the acquisition of the U.S. company.
Analysts indicated that the real significance of this acquisition was to
lay the foundation for the normal operations of the Sino-Kazakhstan
pipeline. At the same time, it was very helpful for other Chinese energy
exploration projects in Kazakhstan.

E-mail: zhangqinghua@chinanews.com.cn Tel: 8610-88387443 Fax:
8610-68327649

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