Marilyn radler
Senior Editor-Economics
An energy outlook survey of chief financial officers at US exploration and production companies found that concerns about increased dependence on foreign sources of oil persist in light of US President Barack Obama's proposals to eliminate certain tax incentives for US-based producers.
Indeed, 57% of respondents of the survey, conducted last November by financial services firm BDO, expressed such concerns that the changes also would send investment dollars and jobs overseas.
"One message came through loud and clear in this year's survey: Legislative changes represent the biggest threat to growth in the oil and gas industry," said BDO partner and natural resources industry practice leader Charles Dewhurst.
The survey also found that despite an expected increase in global oil demand, only 7% of companies in the random sample survey plan to expand to new geographic areas outside the US in 2011.
Investments inside and outside the US this year will climb, though.
CNOOC spending
China National Offshore Oil Corp. Ltd. (CNOOC) announced that it has planned a robust capital budget and strong production growth for 2011. CNOOC said its capital expenditures will total $8.77 billion this year. The company's 2010 budget was set at $7.93 billion, a 30% jump from 2009 spending.
Spending will support sustainable growth as well as deepwater exploration and development, including in the South China Sea, as the Beijing-based company drills 96 exploration wells during the year. Exploration capital spending will be $1.56 billion, CNOOC said, while outlays will total $5.05 billion this year for development and $2.02 billion for production.
Projected net production this year is 355-365 million boe, assuming that the price of West Texas Intermediate crude oil averages $82/bbl. Last year, net production was about 328 million boe.
Chinese government ties
Just how closely Chinese oil companies are controlled by the government is part of a new report by the International Energy Agency that highlights inaccuracies in some commonly held views of those companies.
IEA noted that before this report, titled Overseas Investments by Chinese National Oil Companies, there had been little analysis to test the presumption that these oil producers act under the instructions and in close coordination with the Chinese government.
The report finds that Chinese producers operate with a high degree of independence from the government, and contrary to some beliefs, their investments have largely boosted global supplies of oil and gas, on which other importers rely.
Julie Jiang and Jonathan Sinton, IEA experts on China and the report's authors, said these are far from puppet companies operating under the government's control, and their investments in recent years have been driven by a strong commercial interest.
These Chinese companies emerged in the 1980s when the government converted ministry assets such as refineries into state-owned enterprises, aiming to stimulate competition so that the companies were subject to market discipline. The companies in the early 1990s invested in other countries and have grown into big international players. The largest one, the report says, is China National Petroleum Corp., the world's fifth-largest oil company with 1.6 million employees.
Another misperception about the management of these Chinese companies was that the government imposed a quota on the amount of equity oil they must send to China from overseas investments. The research uncovered no evidence of such quotas.
In 2010, China's oil companies invested nearly $16 billion to acquire assets, including refineries, in Latin America, and by late 2010, these companies had equity oil in 20 of the 31 countries where they operated, according to IEA.
Decisions about the marketing of equity oil, where the Chinese companies have control over the disposition of their share of production, appear to be dominated by market considerations, the report said, as almost all of the equity production that Chinese firms have in the Americas has been sold locally rather than shipped to China.
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