December 15, 2015 / 11:48 AM / 3 years ago

Private China firm to take control of unit of Kazakh state oil company

BEIJING (Reuters) - Private Chinese firm CEFC Energy has agreed to take control of a unit of Kazakhstan’s state oil and gas company which mainly owns assets in Europe, as China boosts business with its resource-rich but cash-strapped neighbor.

Kazakhstan's Prime Minister Karim Massimov (L) exchanges documents with China's Premier Li Keqiang during a signing ceremony in the Great Hall of the People in Beijing, China, in this December 14, 2015 file photo. CEFC China Energy Company Ltd has agreed to acquire 51 percent of a unit of Kazakhstan's state oil and gas company which mainly owns refinery and fuel assets in Europe, the little-known private firm said in a statement. The agreement was part of a package of deals worth a total of $4 billion signed late on Monday in Beijing in sectors including oil and gas, telecommunications and nuclear power, with China looking to ramp up business with its resource-rich Central Asian neighbour. REUTERS/Greg Baker/Pool/Files

The agreement was part of a package of deals between the two countries, worth a total of $4 billion, signed on Sunday and Monday in Beijing in sectors including oil and gas, petrochemicals, uranium mining and telecommunications.

That comes as China pushes to create a modern-day Silk Road under its “One Belt, One Road” initiative, planning to build railways, highways, oil and gas facilities, power grids and other links across Central, West and South Asian nations.

CEFC China Energy Company Ltd will acquire 51 percent of KMG International (KMGI), a fully-owned unit of Kazakh state oil and gas firm KazMunayGaz KMGZ.KZ, according to a statement from the little-known Chinese firm and two senior sources there. One of the sources valued the deal at $500 million to $1 billion.

KMGI officials said they were unable to immediately respond to requests for comment.

“Kazakhstan will be keen to secure external financing for energy projects with oil prices threatening to drop further,” said Ben Simpfendorfer, managing director at Hong Kong-based consultancy Silk Road Associates.

Among KMGI’s key assets are a 100,000 barrels per day refinery and a 400,000 tonnes per year fertilizer plant in Romania, along with nearly 1,000 petrol stations in Romania and other countries such as Spain and France, according to the CEFC source.

CEFC, which has been branching into oil and gas after starting in the Chinese financial sector, plans to invest “billions” of dollars to expand the retail network to more than 3,000 gas stations, the source said.

Part of the funding would come from China’s $40 billion ‘Silk Road’ infrastructure fund, he added.

“Kazakhstan is rich in oil and gas and has been China’s friendly neighbor. The deal well fits the government’s One Belt, One Road plan,” said the source, who declined to be named due to company policy.

Private Chinese firms like CEFC and ENN Energy (2688.HK) have been stepping up their overseas business, while a crackdown on corruption by Beijing and 7-year-low oil prices have been stalling acquisitions by state giants like PetroChina (0857.HK) and Sinopec (0386.HK).

Also part of Monday’s package of deals, China National Chemical Engineering (601117.SS) agreed on a procurement and construction project worth $1.87 billion with Kazakhstan Petrochemical Industries to build a natural gas-fueled chemical complex, the Chinese firm said.

Meanwhile, CGN Mining Co (1164.HK), a listed subsidiary of state-owned China General Nuclear Power Corporation, said it had entered into an agreement with Kazatomprom for a minority stake to develop uranium deposits in the Central Asian country.

CGNPC Uranium Resources, another subsidiary, will also work with Kazatomprom to supply fuel to customers in China, Kazakhstan and potentially elsewhere.

Sinopec, whose listed flagship is Sinopec Corp (0386.HK), also signed a memorandum of understanding with KazMunayGas on co-operation in exploration and development as well as in petrochemicals and renewable energy, Kazakhstan’s sovereign wealth fund said on Monday.

China’s $40-billion “Silk Road” infrastructure fund has agreed to contribute $2 billion to a new investment fund to support “capacity cooperation” with Kazakhstan, the official Xinhua news agency reported on Monday.

Reporting by Chen Aizhu and Adam Rose,; Additional reporting by Kathy Chen; Editing by Joseph Radford

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