By Wayne Ma
BEIJING--Chinese energy companies may find it tougher to invest
in Canada after Cnooc Ltd.'s (CEO) $15.1 billion takeover of Nexen
Inc. (NXY) compelled Canadian Prime Minister Stephen Harper to say
future deals would only be approved under "exceptional"
circumstances.
The massive buyout, approved Friday, may encourage companies
such China Petrochemical Corp., or Sinopec Group., and China
National Petroleum Corp. to go for ambitious deals elsewhere,
something they may well not be too unhappy with having already
built up a considerable asset base in the country and its energy
companies.
The Nexen deal, China's largest overseas acquisition to date,
comes seven years after Cnooc's 2005 failure to acquire Unocal
Corp. for $18.5 billion. The bid made Chinese energy companies more
cautions about overseas investments in North America, with groups
like Sinopec and Cnooc usually taking minority stakes in U.S.
energy assets rather than seeking outright acquisitions.
Earlier this year, Sinopec agreed to pay roughly $2.5 billion to
Devon Energy Corp. (DVN) of Oklahoma for stakes in drilling
properties in Ohio and elsewhere. Cnooc bought stakes in Chesapeake
Energy Corp.'s (CHK) rich shale fields in south Texas, as well as
fields in Colorado and Wyoming in 2010 and 2011. Cnooc also took
minority stakes in some of Statoil ASA's (STO) leases in the Gulf
of Mexico in 2009.
But in Canada, it has been a different story. Sinopec paid 2.2
billion Canadian dollars (US$2.2 billion) last year for Daylight
Energy Ltd. (DAYYF), a Canadian conventional oil and natural gas
company. In 2010, it paid $4.65 billion for a stake in the huge
Syncrude oil-sands project in Alberta. Also last year, Cnooc bought
oil-sands producer OPTI Canada Inc.
Although Chinese energy firms initially directed much of their
attention toward buying into highly prospective upstream assets in
countries such as Brazil, Venezuela and the U.S., the Nexen deal
may suggest an acceleration of a shift toward assets that already
are producing. Nexen's North Sea assets produced around 85,000
barrels a day of crude last year, and 26,000 barrels a day more are
expected to come on line in 2014.
"Given China's dependence on imported crude, the Chinese want
production, and there's a raft of companies they could buy," said
Simon Powell, head of Asian oil-and-gas research at broker CLSA,
ahead of Friday's announcement by the Canadian government.
China's dependence on foreign crude is expected to reach 60%
next year, according to China's top economic planning body, the
National Development and Reform Commission. The country's
dependence on natural gas imports could reach 35% by 2015,
according to China's 12th five-year plan for natural gas.
Mr. Powell said potential targets by the Chinese could include
BG Group PLC (BG.LN), which recently had a change in management and
might be preparing to sell assets, and U.K.-based Tullow Oil PLC
(TLW.LN), which already is partnered with Cnooc to develop oil and
gas projects in Uganda.
Last month, in an interview with The Wall Street Journal,
Sinopec Chairman Fu Chengyu said his company preferred to go into
partnerships with foreign companies, rather than take them over and
hinted of possible deeper relations with Canada's Talisman Energy
Inc. (TLM), Sinopec acquired a 49% stake in Talisman's U.K. North
Sea oil and gas assets in July for $1.5 billion. Those assets
produced 63,000 barrels a day of oil and gas in the first quarter
of 2012.
Although China's imports of Canadian oil are tiny due to
unfavorable prices and high shipping costs, a few Canadian projects
are being developed with an eye toward exporting to Asian markets:
Royal Dutch Shell PLC's planned liquefied natural gas terminal in
Kitimat, British Columbia, in which a CNPC unit has a stake, and
Enbridge Inc.'s proposed Northern Gateway oil pipeline, which would
take crude from Alberta to the Pacific coast.
However, much of Cnooc's future production in Canada is still
expected to be shipped to the U.S., some analysts say. Although the
International Energy Agency claims in its World Energy Outlook that
the U.S. can become more energy independent by the end of this
decade, it can only do so with the help of Canada, Mr. Powell
said.
Write to Wayne Ma at wayne.ma@dowjones.com
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