BUENOS AIRES, March 3 (UPI) -- Latin America's latest major energy deal gives China more potential say in the region's energy dynamics and most likely will increase the trade giant's footprint in an area rich in resources and vital to China's industry.
Unnoticed by the regional media, China embarked on a strategic plan to acquire energy assets in Latin America before President Hu Jintao put his personal stamp by visiting the region. Hu's visit turned out to be symbolic as he had to cut short a regional tour because of an April 2010 earthquake in northwestern China.
In the meantime, Hu's aides worked on several potential energy deals that are beginning to emerge as talks progress between Chinese-state owned companies' negotiators and vendors with assets to sell.
The latest contract involves $850 million going into the acquisition of an Argentine oil refinery and a network of 700 service stations in Argentina, Paraguay and Uruguay.
It's not an outright Chinese purchase but it involves Pan American Energy buying the package with the aim of developing, reorganizing and streamlining the network to make it more profitable. Pan American Energy is owned by the Bridas Corp., which in turn is co-owned by China National Offshore Oil Corp., the third largest state-owned oil company in China, and Argentina's Bulgheroni family.
As part of the deal Pan America Energy will acquire control of a 90,000-barrels-a-day refinery in Campana, about 47 miles from the capital. Chinese energy strategy includes creation of refining capacity in far off places to give China greater flexibility with the oil it buys or oil fields it may acquire in the future.
The port of Campana will give the new operators of the refinery much wider access to maritime trade routes for crude oil and refined products.
Pan American Energy will be taking control of 500 service stations in Argentina and another 220 in Uruguay and Paraguay.
With the acquisition of the Campana plant Pan American Energy will finally have acquired refining capacity of its own that it will build on in the future to increase capacity.
Pan American Energy is the second largest supplier of crude in Argentina after YPF Repsol but it is also poised to expand beyond Argentine frontiers.
Exxon Mobil expects to complete the sale in the second half of 2011 following regulatory approval.
"The move will make Pan American an integrated company," Jorge Lapena, a former Argentine energy secretary, told news media, in a reference to the company's plan to both produce and refine crude oil.
The deal makes Pan American Argentina's second most important integrated oil group, with 13.7 percent of the fuels market and 17 percent of oil and natural gas production.
Demand for hydrocarbons has been rising in Argentina, partly in response to greater prosperity and partly as a result of trader speculation and stockpiling in response to the rising in price of oil.
Present plans call for Exxon Mobil to retain control of its upstream operations, including exploration, in the region, the company statement said. Company officials said improved operations of the refinery would still leave a major shortfall in supply.
"There's a deficit in refining capacity and this deal doesn't address that issue," Lapena said.
