Prevention is better than cure! Beijing will reduce its dependence on the West, as evidenced by the actions of Chinese oil and gas giant CNOOC, which will sell all its stakes in Britain, Canada and the United States, Reuters reveals. Beijing, itself threatened with sanctions for its support of Russia, which itself has been subject to a Western embargo since its military invasion of Ukraine, wants to prevent parts of its assets from being seized abroad.
Not only has China refused to condemn the Russian operation, but it intends to maintain good relations with Russia, whose hydrocarbons and other commodities it is interested in, to ensure its supplies.
With the acquisition of Canadian producer Nexen in 2012 for $15.1 billion, CNOOC, which has state-owned company status, became one of the world’s largest producers of hydrocarbons.
220,000 barrels of oil equivalent per day
The ex-Nexen’s assets – the name disappeared in 2019 to be merged into the CNOOC brand – include interests in offshore fields in the North Sea, shale gas in northeastern British Columbia, shale hydrocarbon exploration off the coast of Newfoundland and Labrador or Soderglen Wind Farm in southern Alberta, Canada. In the United States, CNOOC has assets in the onshore Eagle Ford and Rockies shale basins and interests in two major offshore fields in the Gulf of Mexico, Appomattox and Stampede. According to Reuters calculations, the cumulative production is around 220,000 barrels of oil equivalent per day (boed). Outside of China, CNOOC is present in around twenty countries.
In March, Reuters hinted that the Chinese giant had given Bank of America a mandate to prepare the sale of its North Sea assets, which include a stake in one of the largest fields in the basin.
The delisting from the New York Stock Exchange was completed last October. CNOOC was among Chinese companies targeted by the Trump administration in 2020 for being controlled by the Chinese military. It plans to list on the Shanghai Stock Exchange later this month in order to continue to be self-funding.
However, CNOOC does not renounce international development. The Chinese major will look to acquire new assets in Latin America and Africa, prioritizing the development of new offshore projects in Brazil (where it is partnering with Petrobras and Shell), Guyana (with Exxon and Hess) and Uganda and Tanzania (with TotalEnergies), according to sources cited by Reuters.
A new configuration of globalization
CNOOC is one of the top five oil companies in the country, along with CNPC, Sinopec, Yang Chang Petroleum and Sinochem Group, and has assets outside the country.
The rivalry with the United States, which has taken on a new dimension with Western sanctions against Russia, could lead to a new configuration of globalization, both diplomatically and economically. This prospect is urging China to secure its vital supplies for its economic development.
As a result, the country is consuming more and more oil. After 13.1 million barrels per day (mbd) in 2021, it is expected to be 15.7 mbd (+9.1%) in 2022, according to the latest monthly report from the International Energy Agency (IEA). And even if it has increased its local production (see chart), it is still not enough to cover the demand for petroleum products in particular.
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This is one of the reasons that will push China, but also India and other Asian countries, to increase purchases of Russian oil, especially since it is being sold at a discount.
Urgency to find a point of sale for Russia
At the moment, such a magnitude has not yet occurred, the IEA notes with a view to the data for February and March. It remains to be seen whether Asian buyers will be able to absorb Russian crude and petroleum products, which were formerly bought by Europe and are banned in the US, UK, Canada and Australia. Without a full redistribution, Russia may have to stop additional oil production with possible longer-term consequences for global supplies,” explains the IEA, which expects Russian production to fall by 1.5 mb/d in April and then by almost 3 mb/d in May .
In fact, the urgency imposed on Russia, more than on its Asian customers, is to find an outlet for its hydrocarbon imports. Pressured by Washington, China is beginning to learn lessons from the Ukraine conflict and is preparing for any eventuality.
Robert Jules
Apr 14, 2022 at 5:21 p.m