News 2019April 2018
Hong Kong listed Citic Resources Holdings is negotiating with Kazakhstan to sell a significant minority stake to the country, which is preparing to play a bigger role in Beijing’s “Belt and Road” trade and development initiative, according to two people with direct knowledge of the matter.
The complicated plan, which still has not been finalised, involves Citic Resources itself selling off a series of assets starting with an under-performing oilfield in northeastern China. It hopes eventually to sell other oilfields in China and various mining and coal assets, these people added.
Meanwhile a Kazakh government entity will inject energy assets into Citic Resources in return for a stake in the company, while powerful Citic Group itself will remain its largest shareholder. Among the most important assets involved will probably be JSC Karazhanbasmunai, which has the right to explore, develop, produce and sell oil from the Karazhanbas oilfield. Today Kazakhstan and Citic Resources each own 50 per cent of that entity.
The deal has been in the works for many months and has the blessing of Chang Zhenming, chairman of Citic Group who is expected to retire next year and wants Citic Resources to become an important participant in China’s principal international initiative, these people added.
Citic Group has long had a close relationship with Kazakhstan: for example, local Halyk Bank agreed to sell a 60 per cent stake in its subsidiary Altyn Bank to Citic Bank Corp in a transaction meant to promote the Belt and Road initiative, while Citic Kazyna Investment Fund I is sponsored by Citic and is a subsidiary of Kazakhstan’s sovereign wealth fund. That fund focuses on infrastructure projects in Kazakhstan, Central Asia and China.
The first step in the transformation of the company is the sale of the Hainan-Yuedong Block in the Bohai Bay Basin in Liaoning Province to Geo-Jade Petroleum Corp, a Shanghai-listed independent oil exploration and production company for a price that is yet to be determined. The Yuedong oilfield, the main field in the Hainan-Yuedong Block, had estimated proved oil reserves of 30.2m barrels of crude oil as of the end of 2017. The purchase of 100 per cent of the issued shares of Citic Haiyue Energy was announced in a filing with the Hong Kong Stock Exchange on April 8.
By Henny Sender for the Financial Times.