The Wall St. Journal provides background on the company that has now formally sought federal government approval of its big bid for Canadian oil and gas producer Nexen (more on that here, here and here). It’s striking that the suitor seems to be assisting China’s vast claims in the South China Sea; one wonders what our government might think about that–and CNOOC’s possible use of Nexen’s expertise in the area:
BEIJING—When China launched its first deep-water oil rig in May, Cnooc Ltd. CEO -0.62% Chairman Wang Yilin delivered a message to employees and his Communist Party superiors about what it meant to Beijing’s ambitions abroad.
“Large-scale deep-water rigs are our mobile national territory and a strategic weapon,” he told a crowd gathered at Cnooc’s glittering headquarters in central Beijing as well as rig workers by videoconference.
…[Nexen] is the latest deal in a dual role that Mr. Wang has assumed since taking Cnooc’s reins last year: running his company as a profit-driven multinational enterprise overseas, and promoting it as a political and strategic asset at home.
Tension between those two roles has sparked worries in China, where some people even inside his company fear that Cnooc’s politically charged moves in the South China Sea could be viewed as too aggressive. Mr. Wang has led Cnooc to defend China’s sovereignty claims there, despite competing claims in some parts of the sea by Vietnam, the Philippines and others…
Cnooc’s recent moves underscore how oil executives including Mr. Wang are using overseas deals to boost political credentials. They come as China has ordered state-controlled enterprises to seek business beyond its shores and as the Communist Party seeks younger leaders who are internationally savvy and competent in business…
State-controlled Cnooc is using the rig to drill three wells this year in the South China Sea—an area with overlapping claims by China and other surrounding nations and an increasingly sore friction point between Beijing and Washington.
As China’s main offshore-oil company, Cnooc has been the Chinese company most involved with the South China Sea.
Cnooc in June said it was offering a new round of oil-and-gas blocks to foreign partners within what Vietnam says is its exclusive economic zone under the United Nations’ Convention on the Law of the Sea.
Vietnam had already begun exploring the area and had signed deals with Italy’s Eni SpA ENI.MI -1.09% and Exxon Mobil Corp. XOM -0.94% to explore there. China says its claims in the South China Sea and its islands have belonged to the country for hundreds of years.
While Cnooc regularly offers blocks for foreign investment in the sea, the move marked its most significant offer in disputed waters…
With the Nexen deal, Cnooc would acquire the Canadian company’s deep-water operations in the Gulf of Mexico. That would provide Cnooc, which mostly operates in shallow waters, with deep-water expertise that could be applied to the South China Sea [emphasis added]…
More on CNOOC, and lots more on the South China Sea. And this just in, as more background:
[US] Prosecutors Link Money From China to Iran
Mark Collins is a prolific Ottawa blogger
13ac4 Responses to “Mark Collins - CNOOC and Nexen: “Deep-Water Rigs Are a ‘Strategic Weapon’””
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August 30th, 2012 at 9:58 am
‘None more blind than they that will not see.’
August 30th, 2012 at 10:14 am
DID’s “Rapid Fire” links to a piece that essentially advocated for Chinese direct investment:
“…
In the meantime China does not seem to lack cash, with a surge of acquisitions in Western countries in sectors such as energy that bring up national security concerns [PDF]…”
http://www.defenseindustrydaily.com/Rapid-Fire-August-30-2012-07516/
The end of the link:
“…
The westward trend of Chinese FDI will continue; the West must adapt to it. The Nexen takeover will be only one of many large-scale Chinese FDI projects to come. Some investors predict an additional $800 billion in Chinese FDI from 2011 to 2016, if current growth rates and government policy hold steady. Given growing uncertainty in global financial markets and increasing risks in sovereign bond markets such as the Eurozone, the need for direct investment by China will likely increase: since January of 2008, Chinese firms have disclosed 1,414 overseas acquisitions with a value of over $235 billion. In order for the US to seize this opportunity, a number of other things must also be done: the US needs to promote further its open market, good investment environment, and business opportunities. This is particularly necessary to counter the negative image created by a few failed cases that Chinese FDI is not welcomed in the US. But a better definition of national security for US companies and potential Chinese investors will be a critical step toward a comprehensive US approach to Chinese FDI.”
http://csis.org/files/publication/Pac1254.pdf
Mark Collins
August 31st, 2012 at 9:19 am
See also:
“The Dragon’s Thirst for Crude…”
http://www.cdfai.org/the3dsblog/?p=982
Mark Collins
August 31st, 2012 at 12:40 pm
Terry Glavin reminds me of this, from a piece of his July 31 (whole thing quite a read):
‘The ‘petro dictators’ are among us
…the big deal is CNOOC’s unlimited access to Beijing’s capital reserves, its mandate to lose money if that serves the interests of the Chinese Communist Party, its strategic function as a state entity directly answerable to the party itself, and its role as Beijing’s overseas oil acquisitions arm. When CNOOC sets up shop beyond mainland China a company asset is to be considered “sovereign territory” and a “strategic weapon.” That’s how CNOOC chairman Wang Yilin puts it, anyway…’
http://www.ottawacitizen.com/opinion/columnists/petro+dictators+among/7013214/story.html
Mark Collins