CNPC to Issue Bonds to Buy PetroChina Shares, Expand

By Wang Ying and Winnie Zhu

Oct. 27 (Bloomberg) -- China National Petroleum Corp., the nation's top oil producer, plans to issue 20 billion yuan ($2.9 billion) worth of bonds to buy shares in listed unit PetroChina Co. and fund overseas exploration projects.

The bonds will be issued on Nov. 3, the Beijing-based state oil company said in a statement on the official Chinabond Web site today.

PetroChina's Hong Kong shares have dropped more than 70 percent in the past year. The parent company will continue to boost its holdings in the listed arm, Jiang Jiemin, PetroChina's chairman, said Oct. 21, without giving details. China National currently had an 86.32 percent stake in PetroChina as of September.

``Excluding the proceeds used to increase PetroChina shares, 70 percent of the remaining will be used to fund strategic projects such as the overseas construction and explorations,'' China National said in today's bond sale statement.

The company said last week it signed an accord with Uzbekistan's state oil company to jointly develop an oilfield in the central Asian country.

China and Iraq plan to sign a $3 billion oil agreement, the Associated Press reported in September, citing a spokesman from the Middle East nation's oil ministry. The accord will allow China National to develop the Ahdab field for 20 years, the news service had said, citing Assem Jihad.

Oil companies in China have resumed their quest for global resources after a two-year hiatus as the worst financial crisis since the Great Depression and falling commodity prices prompt a sell-off in share markets, making companies cheaper to acquire.

PetroChina may buy energy companies made vulnerable by the global credit crisis to expand output and meet rising domestic demand, Jiang said last week.

The drop in oil prices and the current bank crisis offer good opportunities for PetroChina to consolidate resources, Jiang said.

To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net. Wang Ying in Beijing at ywang30@bloomberg.net;