Let the Chinese Spending Begin

They say that when one door closes, another one opens. With investors wondering where to look for gains in a global equity marketplace that sometimes seems to have had all of its doors simultaneously slammed shut, China may have finally unlocked some deadbolts.

As China's enormous stimulus plan gains recognition as a noteworthy catalyst for economic activity in the region, state-run oil giant CNOOC (NYSE: CEO  ) is taking bold steps to ensure that the vast oil- and gas-producing potential of the South China Sea will be available to fuel the country's growth. A week after CNOOC announced its $29 billion plan to develop drilling projects in the region through 2020, market-intelligence group Industrial Info Resources reports that project partners will include Anadarko Petroleum (NYSE: APC  ) and Devon Energy (NYSE: DVN  ) .

Both of these companies have been active exploration partners in the area, so while the choice may not come from out of left field, the scale and longevity of China's commitment to this development program nonetheless makes this an exciting venture for the two U.S.-based companies. In a still larger context, I expect this news to mark an emerging trend, whereby non-Chinese companies will be identified as direct beneficiaries of China's sudden and dramatic shift into an aggressively pro-growth economic stance.

But while the project signifies an open door to oil and gas development near China's shore, doors are rapidly slamming shut on more marginal projects around the world. Particularly with the severity of the global credit crunch, projects that looked very promising when we had $140 per-barrel-oil invite renewed scrutiny below $50. Petro-Canada's (NYSE: PCZ  ) decision to delay the massive Fort Hills oil sands project stands as just one glaring example. Some analysts anticipate additional project delays and cancellations to come from energy titans such as ConocoPhillips (NYSE: COP  ) and Marathon Oil (NYSE: MRO  ) .

And a one door opens for Anadarko and Devon, another one closes on ExxonMobil (NYSE: XOM  ) . You see, portions of the South China Sea are home to conflicting territorial claims by neighboring Vietnam and Indonesia. China exerted its considerable influence last summer to oppose a proposed exploration venture between ExxonMobil and Vietnam. With this proposed development initiative, China is wasting no time exerting a preeminent historical claim to the waters in question.

Since investors may find the maze of doors disorienting, I recommend that Fools pay special attention to the doors that lead to China.

Further Foolishness:

If you believe that China will be a keystone to recovery for countless companies with exposure there, then consider taking the Motley Fool Global Gains newsletter service for a test-drive for 30 days. The Global Gains team watches China carefully as part of its search for exciting and Foolish investment opportunities around the globe. CNOOC is a Motley Fool Global Gains recommendation.

Fool contributor Christopher Barker has never been to China, but he can see a Chinese restaurant from his front porch. He can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Anadarko Petroleum and CNOOC. The Motley Fool has a disclosure policy.


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  • Report this Comment On December 03, 2008, at 11:53 PM, hotrungnghia wrote:

    All we the people of Vietnam against the planned exploration and exploitation of oil and China on the sea east of Viet Nam (south china sea). We object to action against the declaration of the Asean countries in 1992 with China. We will have the flat to pay appropriate for China, Chu spratly Islands is the right of Vietnam and some Southeast Asian countries, where there is no sovereignty of China. We object to actions causing this war of China.

    ethnic Vietnamese will be determined against China. we called on Asean countries unite together against the action of this invasion of China to ASEAN countries.

    http://360.yahoo.com/hotrung.nghia

  • Report this Comment On December 03, 2008, at 11:54 PM, hotrungnghia wrote:

    All we the people of Vietnam against the planned exploration and exploitation of oil and China on the sea east of Viet Nam (south china sea). We object to action against the declaration of the Asean countries in 1992 with China. We will have the flat to pay appropriate for China, Chu spratly Islands is the right of Vietnam and some Southeast Asian countries, where there is no sovereignty of China. We object to actions causing this war of China.

    ethnic Vietnamese will be determined against China. we called on Asean countries unite together against the action of this invasion of China to ASEAN countries.

    http://360.yahoo.com/hotrung.nghia

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