China Petroleum & Chemical Corp. agreed to form a joint venture that will acquire $3 billion in oil and gas assets held by its state-owned parent in countries including Kazakhstan, Colombia and Russia.
The joint venture between Sinopec Corp., as China's largest oil refiner is known, and parent China Petrochemical Corp. will be called Sinopec International Petroleum E&P Hongkong Overseas Ltd.
Sinopec also reported a 13% decline in profit for last year.
China Petrochemical holds a 73.86% stake in Sinopec. Since 2010, the parent has invested $34 billion in oil and gas deals in the U.K, the U.S., Canada, Brazil, Argentina and Australia, according to data provider Dealogic.
Two people familiar with the talks said in January that $8 billion in assets would be acquired by Sinopec in April. It wasn't clear Sunday whether further purchases will follow the announcement of the $3 billion deal.
The acquisitions are aimed at putting Sinopec on par with integrated global energy companies such as Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell by helping it build up its relatively small reserves to complement its network of refineries.
"The transactions will facilitate Sinopec Corp.'s strategic objective of becoming a more internationalized oil company with significant oil and gas assets," the company said Sunday.
After the transaction, Sinopec's overseas proven reserves will rise more than fourfold to 330.2 million barrels of oil equivalent. Its overseas production will more than double to 58.7 million barrels of oil equivalent. Sinopec's only current overseas asset is a stake in an oil field off Angola's shore.
The arrangement has been spearheaded by Sinopec Chairman Fu Chengyu. Mr. Fu said last year that Sinopec planned to acquire its parent's overseas exploration and production assets, partly to limit the damage on earnings posed by China's caps on domestic fuel prices.
Sinopec primarily is a refining company so is more vulnerable than its rivals to the gap between global prices for crude oil and domestic prices for refined products.
When Mr. Fu ran Cnooc Ltd., the company developed the greatest international reach of China's top-three state-owned oil companies, acquiring assets from North America to Nigeria to Iraq. He left Cnooc for Sinopec in 2011.
Sinopec reported on Sunday that net profit fell to 63.88 billion yuan ($10.28 billion) last year from 73.23 billion yuan in 2011, hurt by higher crude-oil costs and caps on retail prices.
Analysts had projected net profit of 62.6 billion yuan for last year, according to Thomson Reuters.
Operating losses from Sinopec's refining business narrowed to 11.4 billion yuan from 35.8 billion yuan.
The company plans to refine 238 million metric tons of crude oil this year, up from 221 million tons last year.
State-run PetroChina Co., the country's largest oil company by capacity, on Thursday reported a 13% decline in net profit.
Cnooc, China's third-largest oil producer, recently reported a 9.3% decline in 2012 net profit. Cnooc, which is digesting its $15 billion purchase of Canada's Nexen Inc., has few refining assets.
Analysts have forecast that earnings for PetroChina and Sinopec will improve this year, assuming the implementation of planned changes by the National Development and Reform Commissionin the system for pricing refined products and natural gas.