Nexen deal sees US hobble CNOOC in Gulf fields
CNOOC, China's largest offshore oil and natural gas producer, has been barred from controlling Gulf of Mexico oilfields under the terms of its US$15 billion takeover of Canadian firm Nexen.
The state-owned oil giant's purchase of Nexen includes about 200 deep-water leases in the Gulf. The company surrendered operating control of them to quell US national security concerns.
Nexen controlled platforms in the near-shore West Delta oilfield within 80 kilometres of the US Naval Air Station Joint Reserve Base at Belle Chasse, Louisiana, southeast of New Orleans.
The requirements contrast with approvals for state-owned companies including Norway's Statoil and Brazil's Petroleo Brasileiro to control drilling and production in the Gulf.
Nexen said on February 12 it had received approval from the Committee on Foreign Investment in the United States for its takeover by CNOOC.
The "most significant" term of CNOOC's agreement with the American committee was its transition from operator to non-operator, Peter Addy, the president of Nexen's US unit told staff.
The word "operator" is an industry term to describe who has responsibility for decision-making on a project.
CNOOC will still own the assets and be allowed some general oversight, as well as to collect revenue from the properties.
Patti Lewis, a spokeswoman for CNOOC's Nexen unit in Calgary, declined to comment on the specifics of the approval. CNOOC officials in Beijing were not available for comment.
Castor Pang Wai-sun, an analyst with brokerage firm Core Pacific-Yamaichi, said the change helped to accelerate completion of the deal.
"CNOOC would likely suffer higher financial costs if the deal was delayed again. The compromise by CNOOC is reasonable and positive," he said.
The Nexen deal was originally announced last July and received the green light from the Canadian regulators in December. A major hurdle was not overcome until last month, when the deal was cleared by the American regulator.
Pang said CNOOC might have lost the right to decide on the output of the Gulf fields by becoming a non-operator. "It may affect its plan to meet its own output target," he said.
CNOOC announced in January that it aimed to achieve oil and gas output this year of 338 million to 348 million barrels of oil equivalent, close to its target of the previous year.
Linus Yip Sheung-chi, a strategist at First Shanghai Securities, said although the Gulf oilfields were unlikely to make an immediate contribution to CNOOC's output, it was still under pressure to meet its output target in the long term.
Despite the hurdles of the Nexen deal, Pang said Chinese oil and gas companies would continue to step up efforts in overseas acquisitions.
"The oil and gas resources in China are not sufficient; these companies need to seek opportunities overseas," he said.
But such acquisitions of strategic resources would continue to face hurdles when seeking approval from regulators from other countries, Yip said.