Cnooc Buys Oil Interest In Nigeria
Tuesday, January 10, 2006
SHANGHAI, Jan. 9 -- The Chinese state-controlled energy company Cnooc Ltd. on Monday announced a $2.27 billion deal to buy a 45 percent stake in a substantial offshore oil field in Nigeria, its first major foreign foray since its failed effort to purchase the American firm Unocal Corp. last summer.
The deal with South African Petroleum Co. is the latest in a string of Chinese investments abroad aimed at securing stocks of energy to fuel the country's relentless industrialization and its continued embrace of the automobile.
In recent years, Chinese firms -- encouraged by the central government and lavished with state credit -- have secured multibillion-dollar deals to buy into oil and natural gas ventures from Indonesia and Australia to Venezuela and Angola. Last year, China's largest energy firm, China National Petroleum Corp., agreed to pay $4.2 billion for a stake in an oil field in neighboring Kazakhstan, in the biggest overseas purchase ever made by a Chinese company.
For Cnooc, Nigeria represents its first significant venture in Africa, which has emerged as a central piece of China's global energy quest. China imports about 40 percent of its crude oil, with more than half coming from countries in the Middle East. But growing concern about instability in the region -- a fact underscored by the U.S.-led war in Iraq, once a centerpiece of China's oil aims -- has prompted Beijing to seek out sources in other parts of the world.
Russia has emerged as a primary focus, with China continuing to jockey with Japan for a pipeline that would bring oil from Siberia. Africa, scorned by many multinationals as an unstable and difficult terrain for business, has become another key area of China's diplomatic and commercial concern.
"China needs oil, and China is working everywhere" said Shen Dingli, an international relations expert at Fudan University in Shanghai. "We have been too dependent on Middle East oil, and we want to diminish that dependence to have energy security."
In its quest for energy, China has shown a willingness to do business with regimes shunned as pariahs by much of the rest of the world for human rights abuses. Two years ago, Beijing signed a $70 billion energy deal with Iran at a time when the United States and Europe were debating whether and how to sanction the country for pursuing a nuclear weapons program. China National Petroleum is the single largest partner in a consortium that is extracting oil with the government of Sudan, a regime that has been accused of perpetrating genocide in its western region of Darfur.
Now, Cnooc is set to enter the oil patch in Nigeria, where human rights groups have long asserted that profits are coming at the expense of people pushed off their land, with the bounty flowing to those connected to a corrupt government.
A Cnooc spokesman, Xiao Zongwei, brushed off such concerns, noting that most of the multinational energy giants, including Royal Dutch/Shell PLC and Exxon Mobil Corp., are already present in Nigeria.
On Monday night, Cnooc's spokesman said the company could buy into the Nigeria stake using funds it already has. He said the deal would give Cnooc partial control over a field that could produce as much as 175,000 barrels a day by 2008, which would make it larger than any single field the company operates today in China or Indonesia, where it bought a large offshore interest four years ago.
If that production comes to fruition, Cnooc's 45 percent stake would boost by about one-fifth the company's total production of about 427,414 barrels a day as of Sept. 30.
For Cnooc, sealing the Nigeria deal should be significantly easier than the torturous process triggered when it tried to buy Unocal for $18.5 billion last summer. At a time of mounting trade tensions between the United States and China, critics in Congress branded the venture a threat to U.S. national security. Opposition ultimately prompted Cnooc to drop its bid, clearing the way for Chevron Corp. to buy Unocal.