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China Primed for U.S. Oil Market in 2012

Stocks in this article: BP MRO BEXP KMI EP STO CEO ECA PTR SHI BHP

NEW YORK ( TheStreet) - China's energy use has been a key driver for oil prices even while it's remained on the sidelines in the consolidating U.S. oil marketplace.

But that may be about to change in 2012 as energy finds and economic forces will push China to look for inroads into the U.S. market, albeit through less politically challenging joint venture deals.

Recent shale discoveries in the U.S. -- which holds 750 trillion cubic feet of gas and 24 billion barrels of oil resources according to July estimates by the U.S Energy information Administration -- will peak the interest of Chinese oil companies looking to tap rock-trapped hydrocarbons, according to Mark Gilman, an analyst with brokerage firm Benchmark.

Venture stakes in deepwater oil exploration assets outside of North America may be a sign of what's to come in China's U.S. shale interest.

Earlier in November, Sinopec (SHI) bought a 30% stake in Portuguese energy company Galp Energia's Brazilian subsidiary Petrogal Brasil for over $5 billion. With Petrogal, which is now valued at $12.5 billion, China picked up stakes in the Jupiter and Tupi offshore oil fields -- the largest oil finds in the western hemisphere since the 1970s. The Brazilian oil stakes, trapped under salt domes in deepwaters, add to a legacy of Chinese oil ventures with established players in hard to drill areas.

In 2009, Sinopec did its biggest ever deal, paying nearly $9 billion for Addax Petroleum, a Swiss oil company with oil prospects in Iraq, Gabon and Nigeria. The deal barely overshadowed Sinopec's $7.1 billion purchase of a 40% stake in the Brazilian assets of Spain's Repsol in 2010.

More recent Chinese venture announcements in sophisticated drilling operations show how companies may get involved with U.S. firms next year.

In October, Sinopec paid $2.1 billion for Canada's Daylight Energy, which holds 300,000 acres of shale oil and gas drilling assets. This November, Bloomberg recently reported that Marathon Oil (MRO) was in talks to sell its Angolan offshore operations to Sinopec and other Asian buyers for $800 million, according to two people with knowledge of the process. Reports also indicated that Marathon may look to sell 30% of a joint venture in its Gulf of Mexico deepwater assets for $1 billion to Asian buyers as part of the Houston -based company's announced plans of oil asset sales up to $3 billion.

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