By Chen Aizhu and Ruma Paul BEIJING/DHAKA (Reuters) – Chinese state-owned oil company Zhenhua Oil has signed a preliminary deal with Chevron to buy the U.S. oil company’s natural gas fields in Bangladesh worth about $2 billion, two Beijing-based Chinese oil executives said. Zhenhua is a subsidiary of Chinese defense conglomerate NORINCO. A completed deal would be China’s first major energy investment in the South Asian country, where Beijing competes with New Delhi and Tokyo for influence. But Bangladesh has first right of refusal on the assets and could block the transaction. The country is interested in buying the gas fields through its national oil company Petrobangla and is negotiating financing with international banks, a banking source familiar with the process said. Bangladesh is in the process of hiring global energy consultant Wood Mackenzie to assess the fields’ reserves before making a formal bid to buy the assets, two Bangladeshi sources familiar with the matter told Reuters. The Bangladeshi sources said they were unaware of Zhenhua Oil’s competing interest in the Chevron fields. “As this project is in the process of commercial talks, we cannot comment due to our company policy,” said Zhang Xiaodi, spokesman for Zhenhua Oil. Zhenhua Oil is a small oil and gas company that looks tiny compared to state-owned energy giants PetroChina and Sinopec despite its ties to China’s defense industry. It is trying to formalize its deal with Chevron by June after the two companies signed a preliminary pact in January, the two senior oil executives told Reuters. Zhenhua will partner with China Reform Holdings Corp Ltd, an investment vehicle of the State-owned Assets Supervision and Administration Commission (SASAC). Zhenhua will hold 60 percent of the deal and China Reform 40 percent, the two executives said. The executives declined to speak anonymously because the talks were not public. Chevron confirmed in an emailed statement that it was in commercial talks about its Bangladesh assets, but declined to comment further on policy grounds. Chevron had said in October 2015 that it plans to sell about $10 billion worth of assets by 2017, including geothermal projects in Indonesia and the Philippines and gas fields in Bangladesh, amid a sustained slump in energy prices. Bangladesh knows Chevron is in talks with global companies but has no specific knowledge of Zhenhua’s interest, said Nasrul Hamid, state minister for power, energy and mineral resources. “This is Chevron’s business. We will not intervene, but we are supposed to be the top priority,” he said when asked if Bangladesh would try to block the deal with China. “We will make a formal offer only if the project is viable,” Hamid said. Chevron is selling all output from its three gas fields – Bibiyana, Jalalabad and Moulavi Bazar, which account for over half of Bangladesh’s total gas production – to state-owned energy company Petrobangla under a production-sharing agreement. ZHENHUA BEATS OUT CHINA COMPETITOR With production and revenues having fallen sharply over the past nearly three years due to low oil prices, China’s state-owned energy companies are under pressure to step up efforts to boost their reserves and profits while the price of Brent crude stabilizes at around $55 a barrel. Zhenhua Oil appears to have beaten out the other bidders by partnering with state-owned investment company China Reform, the Chinese executives say. Geo-Jade Petroleum Corp, an independent Chinese oil and gas company, was a close competitor with a $2.3 billion bid, one of the executives says. “Chevron may have chosen Zhenhua because it is a state-owned company and is supported by China Reform,” the executive said. Zhenhua Oil operates oil and gas production in Iraq, Kazakhstan, Syria, Myanmar and Egypt. If the deal with Bangladesh goes through, the Chinese company would reach production of 16 million tonnes of oil equivalent per year, including natural gas and condensate. That would make Zhenhua Oil China’s fourth-largest oil and gas producer, the two Chinese executives said. (Reporting by Chen Aizhu in BEIJING and Ruma Paul in DHAKA; additional reporting by Anshuman Daga in SINGAPORE; editing by Tom Hogue)