CNPC Readying $40 Billion Investment In US Shale: Report

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China’s largest oil firm, the state-owned China National Petroleum Corp (CNPC), could purchase its first U.S. shale asset this year, according to Bloomberg on Wednesday, after the company set aside $40 billion to partake in the U.S.’s energy renaissance.


China’s largest oil firm, the state-owned China National Petroleum Corp (CNPC), could purchase its first U.S. shale asset this year, according to Bloomberg on Wednesday, after the company set aside $40 billion to partake in the U.S.’s energy renaissance.

The report cited CNPC Chairman Jiang Jiemin, at the National People’s Congress meetings in Beijing yesterday, who announced that his company was “currently studying” investing in U.S. oil, amid similar purchases by its domestic rivals.

Bloomberg noted that other Chinese companies had already bought a record $1.52 billion of stakes in oil and natural gas fields in the U.S. so far this year, more than triple what was spent in the whole of 2012. The largest purchase was a $1.02 billion deal by China Petrochemical Corp (Sinopec) to acquire stakes in an Oklahoma field from Chesapeake Energy Corp.

“The Chinese want to gain experience in shale gas, oil sands and deepwater so they can redeploy the best U.S. practices and technologies” back in China, said Mirae Asset Securities Ltd. analyst Gordon Kwan. “The U.S. is the frontrunner from a political stability perspective. Russia, Argentina, Nigeria could nationalize fields, while Australian assets are expensive.”

However, Chinese companies are likely to be limited to only minority energy stakes in the U.S.

“If the Chinese try and take control then it may be an issue versus taking minority stakes where it seems the Americans are more relaxed,” noted Simon Powell, head of Asian oil and gas research at CLSA Ltd. in Hong Kong.

[quote]“China is increasingly staring down the barrel of being more and more dependent on imports, so anything that they can do to hedge they will consider.”[/quote]

Related: China Now Owns A $17 Billion Stake In North America’s Energy Industry

Related: Infographic: Chinese Foreign Direct Investment Patterns In 2012

CNPC, on its part, has openly expressed its desire to double its overseas oil production to 4 million barrels a day by 2015. Among its latest purchases include stakes in energy assets in Canada last year, such as a $1.15 billion purchase of shale acreages from Encana Corp. (ECA) in Alberta last December.

The spending spree by Chinese state-owned oil companies has since prompted the International Energy Agency to predict that Chinese foreign oil production could rival that of OPEC members by 2015. In December 2012, China also provisionally overtook the U.S. as the world’s largest net importer of oil, on the back of a record $35 billion in foreign oil investments.

Related: China’s Overseas Oil Output to Rival OPEC Members

Related: China Surpasses US As World’s Top Oil Importer

Related: China Stockpiling Oil At Record Rate

While “full buyouts will continue to be scrutinized and opposed…stake participation by Chinese companies in U.S. oil fields would be welcomed,” said Will Pearson, a London-based analyst for Global Energy & Natural Resources at Eurasia Group.

[quote]“Participating in key infrastructure like ports and LNG terminals is likely a harder sell and I don’t see Chinese involvement in that market segment,” Pearson added, but “as for stake participation in oil fields, it’s a different story and China will be taking up interests in similar deals in the coming months.”[/quote] 

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