Will China Buy All the World's Oil?

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Nearly a year ago, as we bid adieu to 2008, we might have expected the members of Big Oil to take off on a shopping spree. As it turned out, though, demand for energy has come from a completely different place: China.

Cheap oil's last gasp
Recall that late last year, crude prices were in the latter stages of plummeting from close to $150 a barrel to as low as around $30. Given that freefall, it seemed logical for the majors to begin feasting on some of the smaller players in the industry -- or even on each other. Indeed, some fully expected the latter to occur. The first week of the year brought with it a prediction from BusinessWeek that we should "expect two or more mergers among Big Oil."

Yet while that wasn't a silly prediction in itself, the publication's primary forecast that Shell (NYSE: RDS-A) would buy "troubled" BP (NYSE: BP) clearly showed that it had tossed logic aside. Just 11 months later, it's evident that if either of the two largest European majors is "troubled," it's not BP. CEO Tony Hayward has moved BP back into the upper echelon of Big Oil, alongside ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX).

Where the action is
There were some mergers of note among Western oil companies, perhaps most notably the combination of Canada's Suncor (NYSE: SU) and PetroCanada. But the real story of the year (and almost certainly for the next several years) was China's quick-draw with its checkbook. During the year, Chinese funds made investments in energy-rich locations around the world, from Brazil and Venezuela to Kazakhstan and Angola.       

Moreover, that trend seems likely to continue. Earlier this year, CNOOC (NYSE: CEO), China's largest offshore operator, appeared ready to do battle with Exxon for nearly a fourth of the big Jubilee Field offshore Ghana in West Africa. And while it looks as though that potential confrontation has abated, the Chinese company could still make a run for Devon Energy's (NYSE: DVN) Gulf of Mexico assets, which are now on the block. Even though Exxon and Chevron have also both been mentioned as possible acquirers, CNOOC's deep pockets just might leave it operating a stone's throw from U.S. shores.

Many energy-lovin' Fools know I have a high regard for companies like Exxon and BP. But the majors of the Western world are hardly the only way to play the sector -- which should be a part of all our portfolios. My advice to Fools is to keep tabs on CNOOC. It's popping up everywhere, and that's unlikely to change.   

CNOOC has been awarded four stars (out of a possible five) by Motley Fool CAPS members. Why not tell the world what you think about CNOOC?