Chinese Company to Buy U.S. Oil Assets

Nov. 4, 2009
It's the first step by a Chinese energy company into the U.S. market.

Norwegian energy group Statoil said on Nov. 4 it was selling some of its U.S. offshore oil assets to China's state-owned CNOOC, marking the first step by a Chinese energy company into the U.S. market.

The sale, announced along with Statoil's quarterly results, involves a limited stake for the China National Offshore Oil Corp. (CNOOC) in four exploitation licences for deepwater blocks bought in 2007 and 2008. "On Oct. 29 Statoil signed a farm down agreement with the Chinese company CNOOC involving a number of Statoil's leases in the Gulf of Mexico," Statoil said in its third-quarter earnings statement.

CNOOC will be acquiring 20% of the Tucker prospect and a 10%t stake on the licences of the Krakatoa, Cobra and Logan blocks, while Statoil will remain the operator of all four blocks.

"In the Gulf of Mexico, it is customary to optimize the portfolio and spread risk involved in exploration drilling efforts," Statoil's spokesman said. Statoil, which is 67% state-owned, declined to disclose the value of the transaction but spokesman Kai Nielsen said that the size of the deal was "very small."

In 2005, CNOOC had to cancel an $18.5 billiondeal with U.S. firm Unocal because the politics of a communist country buying key U.S. assets proved too controversial for Capitol Hill. "It came to signify the general struggle between the U.S. and China," Kurt Barrow, a senior partner at energy consulting firm Purvin and Gertz in Singapore, said at the time.

"CNOOC may have lost the battle but it will not give up the war," Barrow added, illustrating analysts' predictions that the Chinese would take another bid at entering the U.S. market, dominated by American and European companies with more political clout.

In its earnings statement, the firm reported a 13.9% rise in profits, largely due to financial items including currency effects, but it voiced caution about the prospects for an economic recovery. "Although we see signs of improvement in the global economy, there is no firm evidence that industry investment, employment and private consumption have recovered in a sustainable way," chief executive Helge Lund said.

"This calls for cautiousness. Statoil is continuing to reduce costs, and we still have the flexibility to adjust our activity in response to a volatile business environment," he added.

Statoil's net profits came to 7.4 billion kroner ($US1.3 billion)compared to 6.5 billion kroner in the same quarter last year.

Copyright Agence France-Presse, 2009

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