WITH the global scramble for energy assets failing to die, slowly, cautiously and yet surely - China continues to garner energy trophies - one after the other. After it lost its bid to buy Californian driller Unocal for nearly $20 billion in 2005, apparently for political reasons, CNOOC, the Chinese state-backed oil giant, has agreed to buy Canada's Nexen, the Calgary based oil and gas producer, for $15.1 billion. This is the largest-ever Chinese acquisition of a foreign energy company. With the Nexen Inc. deal, CNOOC will gain assets in the Gulf of Mexico and North Sea for the first time. Nexen says it produced 22,000 barrels of oil equivalent per day in the Gulf in 2011. Besides oil sands, it is also active in exploring for natural gas in shale rock formations. It owns about 300,000 acres of shale-gas blocks in the Horn River Basin in British Columbia. Another deal announced last week sees Sinopec, or China Petroleum & Chemical Corp., enter the North Sea through its purchase of a 49 percent stake in Canada's Talisman's Energy. That gives the two firms roughly an 11 percent share in the UK's oil and natural gas production. The UK subsidiary of Talisman has stakes in 51 North Sea oil and gas fields covering around 1,800 kilometers and is the operator of 35 of them. The allure of oil as a vital, strategic commodity that drives the military might, industrial power and wealth of nations is stronger than ever. The last "Great Scramble" was played out, almost the entire 19th and 20th century, in the Caspian and the Middle East. However, the new scrambling grounds are places like Africa, and the "stans" of the former USSR. And once again Canada is a focus too. Nexen is Canadian-based, though only 30 per cent of its production is domestic. The rest comes from the prime scrambling grounds of the North Sea, West Africa and the US. This acquisition is significant on at least two counts. Chinese interest in North America is also about acquiring the technological expertise required from complicated deepwater and shale drilling. Besides it also provides China with new foray into pricing mechanisms. Liao Na, information director at energy consultancy ICIS C1 Energy believes "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." What's next in China's quest for energy? According to a note by brokerage Sanford Bernstein from March, Chinese oil companies' big acquisition appetite only really took off after the financial crisis, because they saw a "once in one hundred years opportunity" to take advantage of cheaper assets and reduced competition. Prior to that, deal sizes were much smaller. Chinese oil companies have also set themselves ambitious targets for international production. Sinopec has a target for overseas production from just under 500,000 barrels per day in 2011 to a million barrels per day by 2015. CNOOC aims to have 30 percent of its total production come from abroad by 2015, up from 20 percent in 2010. China National Petroleum Corp. hopes to double overseas production to two million barrels a day by 2015. In November Bloomberg reported that Marathon Oil was in talks to sell its Angolan offshore operations to Sinopec and other Asian buyers for $800 million. Reports also indicate that Marathon may look to sell 30 percent of a joint venture in its Gulf of Mexico deepwater assets for $1 billion to Asian buyers as part of the Houston -based company's announced plans of oil asset sales up to $3 billion. If the deals were to go through, it wouldn't be Marathon's first sale to Chinese buyers. In 2009, state-backed oil companies Sinopec and CNOOC bought a 20 percent stake in a promising Angolan deepwater oil prospects from Marathon for $1.3 billion. According to Bloomberg data, Chinese oil giants are the second-largest acquirer of oil assets, behind US oil majors, cutting $35.6 billion of acquisitions last year. Notable Chinese deals include Sinopec's November acquisition of a 30 percent stake in Portuguese energy company Galp Energia's Brazilian subsidiary Petrogal Brasil, for over $5 billion. This included access to the Jupiter and Tupi offshore oil fields - the largest oil finds in the western hemisphere since the 1970s. The push into what is known as the Brazilian pre-salt, adds to a legacy of Chinese oil ventures with established players in hard to drill areas. In October, Sinopec acquired Daylight Energy, which holds 300,000 acres of shale oil and gas drilling assets, for $2.1 billion. Last year, Petrochina signed a deal with Encana to buy assets in the Cutback region for $5 billion, a deal which would have been the largest-ever oil and gas acquisition in Canada by a Chinese company. That deal fell apart for undisclosed reasons. More recently, Sinopec bought a 33 percent interest in five shale ventures owned by Devon Energy for $2.2 billion, giving it access and a drilling partner in prized shale assets like the Tuscaloosa Marine, Niobrara, Mississippian, Ohio Utica and the Michigan Basin shale formations. In the meantime, Chesapeake Energy is reportedly looking to sell billions in shale assets as a way to meet a $10 billion-plus funding gap this year. There have been reports that the recent visit by Sinopec's CEO Fu Chengyu to Chesapeake's hometown of Oklahoma City was the prelude to an asset acquisition. With China, one of the largest buyers of crude from Iraq, particularly Rumaila from the country's largest oil field, Iraq and Kurdistan, remain a hunting ground for China - despite obstacles. The total acquisitions by Chinese energy firms jumped from less than $2 billion between 2002 and 2003 to nearly $48 billion in 2009 and 2010, the International Energy Agency says. And apparently the foreseeable glut in North America, domestic resistance to such acquisitions has gone milder - to say the least. Chinese overseas acquisition strategy has come of age!
