TLM

Sinopec Group – the parent company of China Petroleum & Chemical Corp. (SNP) – is looking to purchase an equity stake in the $2.5 billion Texas clean energy project, the Wall Street Journal has reported. Total investment, along with contributions from Chinese banks, is estimated at a maximum of $1 billion.

Should the transaction go through, it will be one of the biggest by a Chinese company in the power sector of the U.S. The deal is expected to be announced in September this year with full financial details and the size of the stake.

Being developed by Seattle-based Summit Power Group LLC, the Texas clean energy project (400 megawatt) will be capable of capturing around 90–99% of carbon dioxide, sulfur dioxide, nitrogen oxide and mercury created by it. It will be an integrated gasification combined cycle facility. The project, which has received $450 million in grants from the U.S. Department of Energy, is expected to be ready by 2015.

Sinopec Group hopes to gain experience in carbon dioxide flooding through this project, which will enhance its output while extracting oil.

This will not be Sinopec’s first overseas acquisition. The company and its Chinese peer CNOOC Ltd (CEO) have already made major acquisitions in the international oil and gas sector. During the first half of the year, total Chinese purchases were $5.1 billion compared to $16.3 billion last year and $23.4 billion in 2010.

China Petroleum & Chemical Corporation, with its head office in Beijing, is one of the largest petroleum and petrochemical companies in Asia. The company recently entered into an agreement with Talisman Energy Inc. (TLM) to buy its 49% equity stake in the UK North Sea assets for $1.5 billion.

China Petroleum & Chemical Corporation currently retains a Zacks #4 Rank (Sell rating) for the short run.
 

 
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