HONG KONG - China National Offshore Oil Corp's likely acquisition of oil field assets in Africa should silence critics concerned that the country's top offshore oil producer has been sitting on too much cash for too long.

CNOOC has been a noticeable absentee from overseas M&A since it paid $2.7 billion for a stake in French oil major Total's African Akpo field in 2006. A year earlier, it was bumped by a U.S. political backlash from buying U.S.-based oil company Unocal.

Analysts had begun to question the group's bullish production growth forecasts, pushing CNOOC to seek more outbound deals.

The Chinese group may now be about to pay up to $2.5 billion for Ugandan assets owned by Heritage Oil Plc.

This deal makes a lot of sense in the longer term, said Gordon Kwan, head of regional energy research at Mirae Asset Securities. Acquisitions are the fastest way for a company to grow its production and reserves, while not every exploration effort will result in new discoveries.

Now's the best time to come back to the market, with oil prices down 50 percent from an all-time high, Kwan said, noting that if CNOOC were to pay $2.5 billion for a 20 percent stake, it would be getting 164 million barrels at $15 per barrel.

It's not unreasonable, he said.

The sale process for the oil fields, which executives say contain around 2 billion barrels of oil, has been a competitive process between British, Italian and Chinese oil majors.

On Friday, Italy's Eni SpA pulled out of a planned $1.5 billion purchase of Heritage Oil's 50 percent share of Ugandan Blocks 1 and 3A -- in which London-listed Tullow Oil Plc has preemption rights.

Tullow and Heritage control three oil blocks that cover the Ugandan side of Lake Albert, but the explorers lack the resources to develop the project alone.

Tullow has said it wants to sell the Heritage assets on to CNOOC. A Dow Jones report on Friday said CNOOC was preparing a statement about a $2.5 billion deal with Tullow.

Heritage Oil said on Monday it will receive $1.35 billion on completion of the sale of its Ugandan assets.

These assets are in offshore development, which clearly CNOOC has expertise in, said Neil Beveridge, senior oil analyst at Sanford Bernstein, adding that CNOOC's ability to attract capital when needed would work in the Chinese firm's favor.

CNOOC has a very low gearing and the ability to call on lending for Chinese banks probably at attractive interest rates, Beveridge said. This should enable CNOOC to pull off this deal without any problems.

CNOOC spokesman Jiang Yongzhi declined to comment.

AFRICAN DREAMS

China's oil and gas companies have announced roughly $18.8 billion in outbound acquisitions this year, according to Thomson Reuters data.

Last year, CNOOC was in the running to buy the prized Jubilee oil field stake in Ghana, owned by Kosmos Energy, which is backed by private equity giants Blackstone and Warburg Pincus.

In September, CNOOC identified 23 licenses in Nigeria in which it would like to buy stakes, including 16 operated by Royal Dutch Shell, Chevron and Exxon Mobil which were up for renewal.

Nigerian politicians are even pumping up a potential deal.

The application was to acquire reserves of 6 billion barrels which we are currently discussing. They are prepared to spend as much as $50 billion, Emmanuel Egbogah, Nigeria's presidential adviser on energy, said in December.

CNOOC said last week it aims to produce 275-290 million barrels of oil and gas equivalent (boe) this year, up from an estimated 226-228 million boe in 2009.

That 21-28 percent increase would represent a higher annual growth target than international oil majors BP Plc and Shell, which have scaled back targets amid falling oil prices.

(Additional reporting by Chen Aizhu in BEIJING)

(Editing by Michael Flaherty and Ian Geoghegan)

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