Marathon Oil, the U.S. based energy company, has initiated a fierce bidding war by alerting potential bidders of its intention to sell a 20% stake in its Angolan-based assets.
Contesting the battleground for the takeover are China, India and Brazil, who are all ready to scoop up the energy resources necessary to fuel their rapidly growing economies. In particular, the ultra-deepwater offshore field is of interest to China, the world's second-biggest energy user which covets deepwater drilling experience for development of its own offshore blocks, as it is seeking supplies to fuel an economy that grew 11.9% in 2007.
On the table are two-third’s of Marathon Oil’s 30% stake in an oil and gas field named Block 32, and its 10.0% interest in Block 31, according to the Hong Kong-based South China Morning Post. The two fields are part of an asset sale program estimated to raise between $2-$4 billion.
According to Exxon Mobil, one of Marathon’s partners on Block 32, at the end of 2007 twelve successful exploration wells had been drilled, unearthing the equivalent of 1.5 billion barrels of oil.
The remaining interests in Block 32 are held by: Total (30%), Sonangol (20%), Exxon Mobil (15%) and Petrogal (5%).
China's top three oil firms: China National, Offshore Oil, and China Petroleum and Chemical – otherwise known as Syncope, have come together to launch a bid believed to be in the region of $1.5 billion, India's Oil and Natural Gas Corp (ONGC) and Brazil's Petroleo Brasileiro (Petrobras) are also in close competition.
The bid from the Chinese trio translates to an acquisition cost of $10.60 per barrel on net proven reserves of 142 billion barrels of oil equivalent, according to comments by Gordon Kwan, a Hong Kong-based China energy research director, in response to a South China Morning Post report. The offer is cheaper than the $23.30 valuation for the reserves of China’s National’s unit, (China National Offshore (CNOOC) Ltd.
In the past foreign bids for U.S. owned energy assets have stirred-up domestic opposition, but this bid is likely to be much less opposed, as the oil resources are located put at sea, said Phil Weiss, who tracks Marathon Oil for Argus Research. In 2005, CNOOC withdrew its $418.5 billion cash offer for California-based Unocal, after it encountered political resistance.
The value of the asset was boosted last month when Angola approved development of neighbouring Block 31, paving the way for oil companies to book potentially huge reserves there. Marathon has said it expects to get government permission for further development of Block 32 about 12 to 18 months after Block 31’s approval.
Marathon is set to meet the bidders and select a successful bidder over the next few days.