China's Next Energy Move

If you look at a map of the world, you can see how Brazil used to nestle right in the nook where the Gulf of Guinea curves into West Africa, back when the two continents used to form a single landmass known as Gondwana. It's no coincidence that these offshore areas now comprise two of the world's greatest petroleum prizes, both of which have oil-hungry China transfixed.

Last year, China's CNOOC (NYSE: CEO  ) started the ball rolling with Brazil's Petrobras (NYSE: PBR  ) , through discussions about swapping access to one another's deepwater basins. Not much more has been heard on this subject over the past year, but I wouldn't rule out such a partnership in the future.

So far in 2009, China has been much more assertive in its West African activities.

Last month, we saw Sinopec Group -- the state-owned parent of China Petroleum & Chemical (NYSE: SNP  ) -- swoop on Addax Petroleum to the tune of $7.2 billion, marking the largest ever overseas acquisition by a Chinese firm. In addition to providing access to Kurdish crude, Addax also provides Sinopec a solid foothold offshore Nigeria, Gabon, and Cameroon.

Next, at the end of last week, CNOOC and Sinopec agreed with seller Marathon Oil (NYSE: MRO  ) to pick up a 20% stake in an exploration block offshore Angola for $1.3 billion. Total SA, ExxonMobil (NYSE: XOM  ) , and other partners on the block have the right of first refusal, so the deal isn't certain to close. Still, it's another bold stroke by the Chinese.

If China, via its state-owned champions, pulls in both Addax and the Angola stake, then it will be just one West African oil deal shy of a hat trick. That's where China's next energy move comes into play.

Last month, I mentioned "CNOOC Ltd.'s recent efforts to snag a stake in Africa-focused Kosmos Energy." A private venture funded by Blackstone (NYSE: BX  ) and Warburg Pincus, Kosmos is the discoverer of the Jubilee field offshore Ghana. The massive find is estimated to hold somewhere in the range of 1.2 billion to 1.8 billion barrels of oil. Kosmos' private equity backers want to cash out, so there's a bidding war brewing.

With Ghana's national oil company, a partner in the field, taking an active role in the sale process, CNOOC is at a disadvantage compared to outfits like BP (NYSE: BP  ) , which bring more deepwater expertise to the table. Still, with a rich enough offer, the Chinese contestant just may come away with the prize. Stay tuned.

CNOCC is a Global Gains selection. Total and Petrobras are Income Investor recommendations. Dive deep into any of our Foolish newsletters free for 30 days.

Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Motley Fool has a disclosure policy.


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