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Chinese oil firms snap up opportunities
Publication Date : 25-07-2012
Chinese oil companies grabbed the opportunity to acquire overseas assets at a time when crude oil prices are low and foreign companies are short of money, energy experts said after China Petrochemical Corp and Cnooc Ltd announced recently two separate acquisitions.
"The acquisitions will help the country lower the risks when energy shortages become an urgent problem in the global market," said Lin Boqiang, director at the China Centre for Energy Economics Research at Xiamen University.
Cnooc, China's largest offshore oil and gas explorer, agreed to pay US$15.1 billion to acquire Nexen Inc, the Calgary-based oil and gas producer.
"Buying more overseas assets is a big trend for Chinese oil companies," said Liao Na, information director at energy consultancy ICIS C1 Energy. "Getting into the North Sea will help Chinese companies participate in the international oil pricing market, which is another important benefit for China in addition to the economic and energy significance of the acquisition."
"Meanwhile, Chinese companies can use the deals to gain experience with oil exploration technologies in the deep sea," she said. "The transactions also show that companies in the international oil exploration market now have a higher acceptance level for Chinese companies."
China Petrochemical Corp, the nation's biggest refiner also known as Sinopec, will spend $1.5 billion for a 49 per cent stake in Talisman Energy Inc's UK unit, which allows the company to gain access to oil and natural gas fields in the North Sea.
The UK subsidiary of Talisman has stakes in 51 North Sea oil and gas fields covering around 1,800 square kilometres and is the operator in 35 of them. The company said it will launch its North Sea operations through the transaction.
"The project, which has mature output and cash flow, has provided a good opportunity for Sinopec to participate in the North Sea energy market amid the background of the current financial crisis and money shortage in Europe," the company said. "China's overseas acquisition strategy is getting mature."
The deal was the second big investment involving a Chinese oil company and a Canadian energy producer on Monday.
In addition, the deals are also beneficial to the companies due to the high political risks of oil exploration in Africa and the Middle East, Lin said.
Oil prices are expected to continue rising, so the deals can shield the companies from the risks of increasing costs for oil exploration operations in the North Sea, Lin added.