Two deals were announced Monday that put China's quest to secure energy resources back in the headlines. The deals vary in scope and scale, but both come from state-owned oil companies, and both illustrate the global trend toward nationalized resources.
CNOOC is China's largest offshore oil producer, and the deal gives the company additional offshore assets in the North Sea, the Gulf of Mexico, and Nigeria. CNOOC will also grow its onshore footprint, picking up Nexen's assets in Western Canada, which include property in Alberta's oil sands.
Will the deal go down?
The CNOOC deal ultimately has to be approved by the Canadian government. The company has had a big North American deal foiled by politics before, namely, its failed attempt to purchase Unocal in 2005. But CNOOC has slowly built up a significant presence in Canada, investing $2.8 billion over the last seven years, and emphasized the Canadian benefits in its statement announcing the deal. Whether these moves will curry enough favor to get the deal passed by Canadian regulators remains to be seen.
The CNOOC deal adds about 900 million barrels of oil equivalent of proved reserves and 1.2 billion boe of probable reserves to its stable. Numbers like that will continue to drive acquisitions in the energy industry, particularly among state-owned companies that need to secure resources for their nations. We have reached the era of consolidation. Expect more deals like this in the future.