China is using its financial reserves to secure oil supplies from a variety of producing countries, ac- cording to a recent report by Wood Mackenzie. The Chinese government in recent months has invested in some of the world's leading oil producing countries through loan packages. CHINA'S NOCS:A 2008 SNAPSHOT

In April, China National Petroleum Corp. acquired a 50% share of upstream Mangistaumunaigaz of Kazakhstan for $3.3 billion and loaned $1.7 billion to KazMunaiGas. An additional $5 billion loan was agreed between the China Export-Import Bank and Kazakhstan Development Bank.

Through the deal, CNPC gained an estimated 420 million bbl of reserves and net production of 55,000 b/d.This production could be delivered directly to China with start-up of the Kazakhstan-to- China oil pipeline, expected in 2011.

In February, China Development Bank committed to loan $15 billion to Russia's OAO Rosneft, majority-owned by the government, and $10 billion to OAO Transneft, Russia's oil transport monopoly. In return, China will receive 300,000 b/d of crude from Russia at market prices, starting in 2011.

China Development Bank and Sinopec Corp., China's leading refiner, signed a memorandum of understanding (MOU) with Petroleo Brasileiro SA for loans reportedly $10 billion - to support future investment in upstream and refining by the Brazilian national oil company (NOC). Plans to increase oil exports from Brazil to China also were outlined with annual trade expected to increase to 100,000 b/d in 2010 and more thereafter.

Petroleos de Venezuela SA and CNPC agreed to increase oil sales to 80,000200,000 b/d under another round of accords signed in February. Meanwhile, Sinopec and PDVSA signed an MOU regarding joint study of field development opportunities in Venezuela.

The Angolan experience

The recent deals mirror Sinopec 's successful strategy to obtain upstream holdings in Angola. Loans to the Angolan government and long-term crude supply deals helped Sinopec acquire 50% of deepwater Block 18 via Sonangol's right to preempt.

Sinopec subsequently leveraged its relationship with Sonangol, the Angolan NOC, into new opportunities in development and exploration. In 2005, a Sinopec-Sonangol joint venture took a 25% stake in Block 3/80 upon expiration of Total SA 's development license. In Angola 's 2006 exploration licensing round, the Sonangol- Sinopec venture was the most aggressive of the bidding companies, submitting three signature bonus bids totaling $3 billion and capturing much of Angola's remaining prime deepwater acreage. Angola is now second only to Saudi Arabia as an oil supplier to China.

M&A ACTIVITY: CHINESE COMPANY EXPENDITURE Fig.