Deal for South American Oil Fields Extends China’s Global Quest for Energy
By JAD MOUAWAD
Published: March 14, 2010
The New York Times
China’s top offshore oil explorer, said on Sunday that it had secured a South American beachhead by agreeing to pay $3.1 billion in cash for a stake in one of the largest Argentine oil explorers, with fields in Argentina, Bolivia and Chile.
The acquisition is the Chinese oil industry’s latest move to expand its reach around the world. Starting at the beginning of the decade, companies like PetroChina, Sinopec and Cnooc began buying assets across Africa, Asia and the Middle East to drive the country’s booming economy. More recently, they have struck deals to develop Iraq’s huge reserves and Canada’s oil sands.
Cnooc, a unit of the China National Offshore Oil Corporation, said it would form a joint venture with the Argentine oil explorer, Bridas Energy, by acquiring a 50 percent share in one of the company’s subsidiaries, the Bridas Corporation.
The Bridas unit has proven reserves of 636 million barrels of oil, and daily production of 92,000 barrels a day. It owns 40 percent of Pan American Energy, the Argentine oil producer, with BP owning the rest.In 2005, Cnooc lost a bruising battle to Chevron in the United States for control of Unocal, after a fierce political reaction to the prospect of a Chinese company snapping up an American company. Since then, Cnooc has looked for strategic assets abroad, rather than entire companies.
In December, it acquired a small stake in four oil fields in the Gulf of Mexico from Statoil of Norway. The company is also reportedly close to buying a stake in the Ugandan operations of Tullow Oil, an small British oil explorer, along with Total of France.
“This joint venture is aligned with our philosophy of seeking partnerships to expand our global footprints,” Cnooc’s chairman and chief executive, Fu Chengyu, said in a statement in Hong Kong.
The deal is Cnooc’s first foray in South America. It requires the approval of the Chinese government and is expected to close by the end of June.
While oil demand has been shrinking in developed nations because of the global economic slowdown and efforts to conserve energy, Chinese consumption is surging. In its latest report, the International Energy Agency said on Friday that China’s oil demand jumped by “an astonishing” 28 percent in January.
As recently as the 1990s, China was still a net exporter of oil. But the nation’s rapid economic expansion has reversed the trend. China’s aging oil fields have been unable to meet its fast-growing energy needs, feed its manufacturing sector and satisfy a rising class of automobile drivers in Chinese cities. As a result, the Chinese government has encouraged its national companies to expand abroad and secure oil supplies.
China is the world’s fastest-growing energy market, and already is the second largest after the United States. It produced 3.8 million barrels a day of oil last year, while consumption reached 8.5 million barrels a day, up from about 4.8 million in 2000.
Chinese oil demand this year is expected to jump by 6 percent, or 500,000 barrels a day, a third of the total growth expected around the world.
China’s international drive to secure raw materials and commodities has led to a flurry of deals.
Last summer, Sinopec, the country’s largest refiner, bought Addax Petroleum, an oil explorer based in Geneva that is active in Nigeria, Gabon and the Kurdistan region of Iraq. The deal was the largest successful foreign acquisition of oil and gas assets by a Chinese company.
In December, PetroChina gained the backing of the Canadian government to buy a stake in two Alberta oil-sands projects for about $1.9 billion. Chinese companies have also been successful in Iraq, where they outmaneuvered international oil companies for access to the country’s giant oil fields.