Sinopec International Exploration and Production Corporation (SIPC), a wholly-owned subsidiary of China's state-owned Sinopec Group, has completed its $680 million acquisition of an 18-per cent stake in Chevron Corp's Indonesian deep-water project.

In December 2010, Sinopec, Asia's largest crude refiner, said that it will acquire an 18-per cent stake in Chevron's $8-billion Gendalo-Gehem deep water natural gas project in Indonesia, for $680 million

Chevron, which has been operating in Indonesia for over 80 years and is one of the largest oil and gas producers in the south east Asian country, had said in November 2009 that it would seek partners for a partial farm-down of its holding in the Gendalo-Gehem project in order to alleviate risk in the venture.

Chevron, based in San Ramon, California, owns 80 per cent of the project, while Eni of Italy and Indonesia's state-owned oil and gas company PT Pertamina own the remaining 20 per cent.

Sinopec will gain technical experience in deep water gas exploration through this acquisition since the gas deposits in the Gendalo-Gehem project lie beneath 6,000 feet of water.

The Gendalo-Gehem project consists of three blocks located in the Makassar Strait offshore East Kalimantan in water depths of approximately 6,000 feet. These blocks had produced 28 million barrels of oil and 168,000bn cu ft (4,757bn cu m) of natural gas by the end of 2009.

Chevron has projected maximum daily production from the project to be 1.1 billion cubic feet of natural gas and 31,000 barrels of condensate.

The project also has five oil and gas fields that have yet to be developed. The project was expected to have a peak 370 thousands metric tonnes of equity oil and 79 billion cubic feet of equity gas in 2016.

Gas from the project will be used both domestically and also converted to liquefied natural gas (LNG) at the Bontang LNG facility in Indonesia for export.

The stake acquisition in the Gendalo-Gehem project, indicates Indonesia's strategic importance for China as a steady and stable source of LNG to meet its growing need for fuels.

This is the second deep water acquisition for Beijing-based Sinopec, which is trying to gain experience in deep water exploration through buying stakes, where overseas oil majors are the operator of the oil and gas fields.

In October 2010, it bought a 40-per cent stake in the Brazilian upstream assets of Spanish oil company Repsol YPF SA for $7.1 billion, its second-largest overseas investment to date.

This week, it entered into the shale gas sector by proposing to acquire Canada's oil and gas explorer Daylight Energy for C$2.2 billion ($2.1 billion) in cash.