OREANDA-NEWS. November 01, 2011. Sinopec's (NYSE: SHI) USD 2.1 billion buyout of Daylight Energy has shown how energy players can take advantage of the drop in energy stocks. The deal is also a sign of China strengthening its presence in the North American oil and gas industry. So, will Sinopec stand to gain from the deal?

Welcome daylight
Daylight has lot of advantages that drew Sinopec toward it. The Canadian oil and gas company has nearly 65,000 net hectares in the gas-rich deep basin area of northwestern Alberta and northeastern British Columbia. Along with this, the company also has significant holdings in the Montney shale formation, which has a pipeline run close to Kitimat in Canada. Alberta-based natural gas producer Encana (NYSE: ECA  ) , along with two U.S. partners, has plans to build an LNG export terminal at Kitimat to export LNG to Asia. Given the market potential LNG carries, Daylight is well positioned to deliver value to Sinopec in the coming LNG era.

With natural gas prices in North America below \\$4 per thousand cubic feet (mcf), margins run low for companies operating in this continent. To fetch higher margins, companies have been on the lookout for other international markets. This is where Sinopec may have a distinct advantage and could be at the start of something big. If the company can liquefy natural gas and ship it to Asia, it can fetch USD 10 to USD 11 per mcf, more than double the price in the American market.