Via The Wall Street Journal, a report that China National Petroleum Corp. and Cnooc Ltd. have proposed paying at least $17 billion for all of Repsol YPF SA’s stake in its Argentine unit YPF SA.  As the article notes:

“…The deal, which could be the biggest overseas investment by China, highlights its growing thirst for energy resources globally and its willingness to offer big money for them, and underlines the ambition of CNPC to build up its presence in South America and elsewhere.

The Chinese side discussed their offer with Repsol executives in a two-and-a-half-hour evening meeting on July 30 in Europe, according to a document seen by Dow Jones Newswires.

A Repsol press official Monday denied the company had met on July 30 with CNPC and Cnooc, but said the company had no further comment.

Earlier Monday, another Repsol press official had declined to comment on whether a meeting had been held on July 30, and that a proposed price of $17 billion had been put forward by CNPC.

Repsol “has received expressions of interest on YPF, but no firm bid,” the official said.

YPF is 84% owned by Repsol. It sold a 14.9% stake to Argentina’s Grupo Petersen in 2007 for $2.24 billion. The remainder is held by minority shareholders.

The 2007 deal included a buy option for an additional 10% stake in YPF. YPF isn’t listed.

Repsol has several times postponed a public offering of a 20% stake in YPF due to adverse market conditions — an indication that the Spanish oil firm doesn’t plan to divest any stake in YPF on the cheap.

Progress on clinching a deal between the Chinese companies and Repsol has been slow, and a formal offer hasn’t yet been made, the people said.

Also, there is Argentine government concern that the stake sale would give China control of domestic pump prices and other upstream resources.

The Chinese appear now to be the only bidder for YPF, although the Indians and Russians had looked at the assets earlier, one of the people said.

The Chinese side — with CNPC taking a leading role — first put forward the offer in black-and-white late June, the second person said.

On July 21, Repsol responded in a letter to CNPC and agreed to continue the negotiations, the second person added.

“Repsol thinks the Chinese would offer more, and apparently Repsol is waiting for other bidders to show up. But the Chinese think the valuation of the assets is fair enough,” the second person said.

A CNPC spokesman said he had no information on the issue, and a spokesman for Cnooc declined to comment.

Light, sweet crude oil started 2009 at near $58 a barrel and has since risen to more than $70 a barrel, which could be an important factor in the negotiations.

“The deal is fully backed and blessed by the Energy Bureau of the National Development and Reform Commission of China, which also thinks it is a very good deal,” one of the people said.

The Energy Bureau will coordinate with CNPC and Cnooc on how the ultimate deal would be structured between the two Chinese companies, the two people said.

There is no deadline in the negotiation, they said.

CNPC is aiming at taking a majority stake in YPF, while Cnooc would likely to have a smaller share, they said.

On July 30, the same date as the meeting, Repsol Chief Operating Officer Miguel Martinez said Repsol continues to be interested in selling a further stake in YPF, but has no imminent deal “on the table.”

Repsol has been looking to sell YPF in order to earn more cash to pay off its debt. On July 30, Repsol said its second-quarter adjusted profit plunged 62% to €265 million, from €694 million a year earlier, citing dramatically lower refining margins and oil prices.

Industry experts have said China would likely meet significant opposition from the Argentine government, which wants to exert more control over strategic natural resources and has had an eye on YPF for some time. There are plenty of ways it could block a transaction, including the golden share it has in YPF.

“There’s a worry that if a Chinese company controls YPF, China will effectively control petrol pump prices in downtown Buenos Aires,” the first person said.

The CNPC-Cnooc bid for YPF is sensitive, given the Argentine company controls the majority of the Latin American country’s upstream operations — the exploration and production of oil — and downstream operations, involving the refining and marketing of the oil.

“There is some opposition in Argentina, but CNPC has said it would be able to handle and resolve any political issues at home in Argentina and it believes there shouldn’t be too much opposition from the government or the general public,” the second person said.

People familiar with the situation said earlier that CNPC, China’s biggest state-owned oil firm, has made bids for stakes in Orinoco oil blocks in Venezuela. It is also in talks to secure a 30% stake in three oil blocks in Colombia, they said.

China’s oil majors have snapped up oil assets recently through a string of deals.

These include the purchase on June 24 by China Petrochemical Corp., the Chinese state-owned oil company also known as Sinopec Group, of oil explorer Addax Petroleum Corp. for US$7.2 billion and CNPC’s purchase of Kazakh oil producer MangistauMunaiGas jointly with Kazakhstan’s state-owned KazMunaiGas for US$3.3 billion.

Chinese oil companies have this year also signed oil-for-loans agreements with Russia and Brazil.