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China ZhenHua expands Southeast Asia upstream exposure with Interra stake

  • Author
  • Eric Yep    Oceana Zhou
  • Editor
  • E Shailaja Nair
  • Commodity
  • Oil
  • Tags
  • straits Crude Gas Oil

State-owned China ZhenHua Oil Co has taken a 13.6% stake in Singapore-listed Interra Resources Ltd. through a private placement worth around $3.47 million (S$4.68 million), in a move that boosts its upstream investments in Southeast Asia.

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The stake in Interra Resources, which has operations in Indonesia and Myanmar, comes amid the strategic expansion of Chinese companies in overseas energy markets and adds to China ZhenHua Oil's existing fields in Iraq, Egypt, Kazakhstan and Pakistan.

On Friday, Interra Resources said it had signed a private share placement of 79.5 million shares at S$0.059 per share with North Petroleum International Co. Ltd., a wholly owned unit of China ZhenHua Oil.

The 13.6% stake makes China ZhenHua Oil the second-largest shareholder in Interra Resources, and also paves the way for the two companies to "further explore a collaborative partnership" in Myanmar where they already have joint operations.

Accordingly, Interra's existing controlling shareholders, Edwin Soeryadiaya, Sandiaga Salahuddin Uno and PT Saratoga Investama Sedaya, will see their collective stake diluted to 13.74% of the company's enlarged issued and paid-up share capital, from 15.9% previously.

Interra Resources said that it intended to use the net proceeds from the placement for general working capital and China ZhenHua Oil will get to nominate a representative to its board of directors.

In Myanmar, Interra Resources and China ZhenHua Oil have a 60% and 40% stake, respectively, in Goldpetrol Joint Operating Co., the joint venture company that operates the Chauk and Yenangyaung fields.

Chauk and Yenangyaung are two of the largest onshore producing oil fields in central Myanmar and are under Improved Petroleum Recovery Contracts with state-owned Myanma Oil and Gas Enterprise that began in 1996 for a 20.5-year period, according to Interra's website.

In August, Interra extended its Myanmar contract for 11 years, allowing it to continue exploration work and accelerate drilling activity in existing acreages. It said the new exploration work would result in a substantial increase in its reserves base.

Interra's combined gross production from both the Chauk and Yenangyaung fields in 2016 was 907,849 barrels of oil. In Q3 2017, Interra's shareable production in Myanmar rose by 9% to 54,197 barrels, from 49,896 barrels in Q2.

"ZhenHua Oil believes that the Chauk and Yenangyaung oil fields have great production potential, and with effort and hard work from both partners, will bring new life to these 100-year-old oil fields," Vice President Yin Lifeng said in a statement.

China ZhenHua Oil is a subsidiary of state-owned North Industries Group, or Norinco, which is involved in the research and production of military equipment and weapons.

It operates 11 oil and gas upstream projects in six countries, with gross production of close to 10 million mt/year, according to the company's website.

China ZhenHua Oil is also in the fuel storage, transportation and refining business, with a trading desk in Singapore that supplies gasoil to Myanmar.

-- Eric Yep,
-- Oceana Zhou,
-- Edited by E Shailaja Nair,