China’s Sinopec has agreed to a $7.2 billion takeover of Switzerland-based oil company Addax, which has interests in Africa and the oil frontier of Iraqi Kurdistan.
Sinopec, one of China’s biggest oil companies, is buying Addax in a deal that would be the country’s largest ever outbound investment in the oil and gas sector.
Addax, which is active in Nigeria and Gabon, is one of the longest-established players in Iraqi Kurdistan, operating the Taq Taq oil field and refinery at the center of a patchwork of oil concessions.
The development of these concessions was until recently stalled by a political dispute between Iraq’s central government and Kurdistan’s regional government.
On June 1, representatives from both governments declared the official start of oil exports from Kurdistan, seemingly resolving the impasse. Addax was one of three companies, including Turkey’s Genel Energy, that started producing the first 100,000 barrels of oil a day. A week later Genel agreed an all-share merger with Heritage Oil, another operator in Iraqi Kurdistan, in a deal worth more than $5 billion.
Sinopec is also competing for oil licences that will soon be awarded by Baghdad in its next licensing round, in a sign that perceived political risk that has led large foreign oil companies to not invest in Kurdistan may be lessening.
The Financial Times in London said that Sinopec will pay a 16% premium to the current market price of the share and an almost 50% premium to its price before it announced the talks.
For those of you wondering where and what Iraqi Kurdistan is, Wikipedia comes to the rescue:
Kurdistan is an extensive plateau and mountainous area in the Middle East, inhabited mainly by Kurds. It covers parts of eastern Turkey (Turkish Kurdistan), northern Iraq (Iraqi Kurdistan), northwestern Iran (Iranian Kurdistan) and smaller parts of Azerbaijan (Kurdistan Uyezd), northern Syria and Armenia. It roughly encompasses the Zagros and the eastern Taurus mountain ranges.
From a political standpoint, Iraqi Kurdistan is the only region which has gained official recognition internationally as an autonomous federal entity. Kurds in Iran are also officially recognized as a minority, although no Iranian territory is designated as ethnically Kurdish.