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A Sinopec petrol station is seen behind traffic lights in Hong Kong, in this file picture taken April 26, 2010.Reuters

Sinopec, the Chinese oil and gas group, is considering bidding for billions of dollars worth of assets owned by Chesapeake Energy, the U.S. gas producer.

Fu Chengyu, head of Sinopec, was in Oklahoma this week in connection with the company's due diligence on the Chesapeake assets, according to people familiar with the move.

By buying assets rather than making a bid for the company itself, Sinopec hopes to minimize the sort of political backlash that forced Cnooc to drop its $18.5-billion (U.S.) bid for Unocal in 2005, bankers and oil executives say.

Chesapeake Energy has been hit hard by low natural gas prices in the U.S. and is in the midst of an asset disposal programme to help reduce its debt; while its shares have fallen 25 per cent from their March peak.

Sinopec is carrying out its own restructuring designed to bring more cash into the company and de-lever its balance sheet as it moves to adopt a more active global mergers and acquisitions strategy.

The Chinese group has 2,000 people looking into opportunities globally and is starting to focus on developed markets for ambitious deals. It has been increasing its overseas mergers and acquisitions since Mr. Fu started leading the group in April 2011, and those close to the company say that the pace of acquisitions is set to pick up.

However, Sinopec's recent losses in the refining sector have left the company highly geared at about 40 per cent - a contrast to other Chinese oil companies such as Cnooc and PetroChina, which have net cash positions - a problem if Mr. Fu is to fund his M&A ambitions.

Sinopec plans to sell off some non-core assets, a process that will include consolidating Sinopec's oil services and engineering subsidiaries into a new unit that will then be taken public. It has not set a date for the public listing but analysts expect it could come in late 2013 or early 2014.

The group is primarily focused on downstream sectors such as oil refining, petrochemicals and distribution, which have been making losses because of a slowing global economy and China's state-set gasoline prices.

Mr. Fu's vision is to shift Sinopec's focus to upstream oil and gas production, where margins are higher. "The Achilles heel of Sinopec is the lack of oil and gas reserve growth upstream while being too dependent on downstream refining," says analyst Gordon Kwan of Mirae Asset Securities. "Among the three national oil companies, Sinopec's balance sheet is the weakest," he adds.

Assuming that funding becomes available, Sinopec's upstream investment focus will be on unconventional oil and gas, both within China and overseas. Since taking the helm, Mr Fu has led Sinopec's $2.5-billion deal with Devon Energy in the U.S., which gives Sinopec minority stakes in some unconventional oil and gas blocks.

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