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April 13, 2010 2:46 PM

Blakes, Osler on $4.65B ConocoPhillips/Sinopec Deal

Posted by Julie Triedman

China continues to move to shore up its access to natural resources. 

On Monday, ConocoPhillips announced plans to sell its 9 percent interest in a Canadian oil sands joint venture to China Petroleum and Chemical Corporation, better known as Sinopec. Sinopec has agreed to pay $4.64 billion for the stake in the oil-producing assets, a venture operated by Syncrude Canada, the world's largest producer of light sweet crude oil from oil sands.

The move is part of Houston-based ConocoPhillips' recent efforts to pay down its debt and drive up returns for investors. And it's just the latest example of China's drive to build global oil and gas reserves to supply its huge and fast-growing economy; the country's oil industry lately has used its cash to take advantage of other global companies' restructuring efforts and to acquire numerous oil assets. One example: Sinopec's parent bought Calgary-based Addax Petroleum for $7.2 billion in 2009.

While Addax's oil-producing assets were located mostly outside of Canada, the Syncrude venture is based entirely in Canada, says Michael Laffin of Blake Cassels & Graydon, Sinopec's lead counsel on the deal. "The significance of this is it's in Canada," Laffin says. "It's very highly prized assets, and it's very well-managed."

The Syncrude Canada venture is a joint venture among seven major oil companies, including ExxonMobil (via its subsidiary Imperial OIl), Suncor, Murphy Oil, Mocal Energy, and Nexen. Syncrude produces 350,000 barrels of oil a day, and has about 5 billion barrels of proven reserves. The company as a joint venture is not traded publicly, but rather through its individual partners.

Blakes' relationship with Sinopec goes back roughly a decade, Laffin says, when the firm helped Sinopec purchase a 40 percent stake in the Northern Lights oil sands project in northeastern Alberta.

Osler, Hoskin & Harcourt represents ConocoPhillips on the transaction. The company began marketing the Syncrude stake last fall, according to this article in the Financial Times. The co-chair of Osler's Calgary-based energy practice, Janice Buckingham, is leading the firm's work on the deal. The Osler team includes energy partner Jack Thrasher and competition partner Peter Glossop, the firms says. Also working on the matter are inside counsel at ConocoPhillips Canada, including vice president-corporate services and chief counsel Graham Vanhegan and Angela Avery.

ConocoPhillips expects the deal to close in the third quarter, pending regulatory approvals in both China and Canada. 

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