Eric Watkins
The US oil and gas industry has doubtlessly watched with interest CNOOC International Ltd.'s decision to buy a 33.3% stake in Chesapeake Energy Corp.'s acreage in the Eagle Ford shale project (OGJ Online, Oct. 11, 2010).
The $1.1 billion purchase, which is the Chinese firm's first test of the US market since its failed 2005 bid to take over Unocal Corp., continues an acquisition strategy developed under Chief Executive Fu Chengyu.
"As one of the world's largest independent oil and gas companies, CNOOC is keeping a close watch on the development of the upstream sector across the world, among which is shale oil and natural gas development," said Fu.
"CNOOC has the desire and ability to establish itself in this field in a suitable scale by cooperating with a leading company such as Chesapeake, which we believe will benefit both parties reflecting our win-win philosophy," said Fu.
Sino-US cooperation
"Partnering with Chesapeake on this project to develop shale oil and natural gas jointly not only satisfies the spirit of Sino-US cooperation in the energy sector, but also underscores CNOOC's responsible approach to climate change issues and its social responsibilities," Fu said.
These statements could not be more diplomatic, and underscore the lessons learned from Fu's own failed effort to take over Unocal 5 years ago. In particular, they underscore the willingness of the Chinese to take smaller stakes in a firm instead of trying to take over altogether.
"They are tiptoeing around the edge, not challenging anybody, not getting in any American Senators' faces—just very quietly taking a position," said David Hewitt, regional head of oil and gas research at CLSA in Hong Kong.
No aggressive moves
"You haven't seen an aggressive attempt to buy whole companies, to own management or have dominant control," said Hewitt of China's new approach earlier this year.
Before trying it out in the US, the Chinese put this new strategy to use in Canada, where Sinopec bought 9% of Canadian oil sands producer Syncrude.
"I have approved the application by Sinopec under the Investment Canada Act to acquire control of the ConocoPhillips partnership because I am satisfied that the investment is likely to be of net benefit to Canada," said Canada's Minister of Industry Tony Clement.
"Through its investment, Sinopec is acquiring a minority interest of 9.03% in Syncrude," said Clement. "There are seven other partners in Syncrude who control the remaining 90.97%. This transaction will not change the level of Canadian control of Syncrude, which will remain at 55.97%."
In a word, the Chinese are learning that the journey of 1,000 miles begins with a single step.
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