Sinopec to Acquire Tanganyika in Bid for Syrian Oil, Of All Things

(MoneyWatch)  In a deal thought to be worth around $1.9 billion, Sinopec International Petroleum Exploration and Production (Sinopec), a wholly owned subsidiary of state-owned China Petrochemical, is to buy Calgary-based Tanganyika Oil. Is China getting a piece of the Alberta oil sands?

Not exactly. Even though Alberta is awash with oil, Tanganyika's ace in the hole is its participation in two Syrian production-sharing agreements in the Middle East. Assuming regulatory clearances sail through by December 24, it looks to be pretty much a done deal.

Tanganyika's reserve reports for December 2007 indicate a net probable, plus possible figure of some 435 million barrels of heavy oil. The gross figure is over 1.2 billion barrels. Now that we are 10 months on from that estimate it could well be more -- much more.

A great deal of China's recent economic boom has been based on subsidized energy -- oil in particular. During the heady days when a barrel of oil was heading towards $150 a barrel, at least partly driven by speculation about China's future demand for oil, China had to cut the subsidy. And now with most of China's European and North American markets in dire straits, it's hard to see the boom going on.

There is also a fundamental flaw in thinking over oil demand from China and India, and China in particular. History is a great teacher. Look back and you will see that on a net basis, China is usually a seller of goods and commodities, not a buyer. State-owned companies acquiring assets for China will, I think, serve to make it market independent for oil, not a global market buyer for any longer than it has to be. Look for more of the same.