A Coal Seam Surfaces

(Beijing) -- China National Offshore Oil Corporation (CNOOC) said it plans to spend 1.2 billion yuan to acquire a 50-percent stake in China United Coal Bed Methane Co., Ltd. in its bid to enter the Chinese coal bed methane (CBM) industry. The acquisition has won support from the State Council, China's cabinet.

A China United CBM executive confirmed the deal with Caixin in a telephone interview on December 21 and said that the transaction is likely to be announced officially soon.
   
China United CBM is wholly-owned by China National Coal Group Corp. and it enjoys exclusive rights to cooperate with foreign investors for CBM exploitation in China. It owns approximately 25 CBM blocks with a total area of 20,000 square meters and approximately 50 billion cubic meters of proven reserves.
   
The company's total registered capital is expected to hit 1.8 billion yuan with the alliance between CNOOC and China Coal. According to the Europe-based industry weekly Upstream report, CNOOC may grant a dominant position in the company and it will likely take over China United CBM's day-to-day operations after the transaction. CNOOC is also expected to invest several billion yuan in 2011 in CBM exploitation.
   
The tie-up offers China United CBM access to capital and CNOOC, a branch of diversification. The oil and gas market, is shared between China National Petroleum Corporation (CNPC) and China Petroleum & Chemical Corp. (Sinopec), with CNOOC ranking third in the market.
  
A report issued by UBS Securities on December 13 said that the size of the transaction seems to be relatively small but it signified CNOOC gaining a deeper foothold into the unconventional gas market in China. Its natural gas portfolio will be more diversified after the transaction, encompassing conventional offshore natural gas, imports of liquefied natural gas, coal gas, shale gas and coal-bed methane.