CNOOC and Petronas to acquire Nexen and Progress
On December 7th, 2012, Canada Prime Minister John Harper announced the approval for two national oil companies China National Offshore Oil Company (CNOOC) and Petronas from Malaysia to acquire respectively:
- Nexen Inc. (Nexen)
- Progress Energy Resources Corp. (Progress)
For Nexen, CNOOC is ready to pay $15.1 billion while Progress should cost $5.2 billion to Petronas.
As driven by national oil companies these takeover operations rise questions in Canada in the meantime that regulators publish verdict on next Monday.
According to Prime Minister John Harper these transactions are the end of a “trend”, calling foreign state-owned companies for more transparency.
Some Canadians wanted to compare Nexen takeover with the CNOOC attempt in 2005 over the American company UNOCAL.
At that time, the American politicians had managed to stop the deal because of Unocal strategic position in the US midstream sector.
With a strong market leadership in oil and gas import and distribution operations in USA, the added value of this acquisition for CNOOC was a question.
On the US side the advantages of this transaction could not be really perceived.
With Nexen, the situation is different and the context is also different.
China is looking for energy sources, and Nexen take over should boost capital expenditure in oil sands and shale gas exploration and production for many years, same with Petronas.
Malaysia is one of the few countries in the world which used to be net exporter of natural gas and may become a net importer in the next five years as the consequence of its economical growth.
Malaysia needs more electrical power to support its economical development and imports more than 50% of its petrochemical products consumption.
The more Malaysia grows, the even faster the import of petrochemical products goes.
To stop these petrochemical imports spiraling up, Petronas is planning the $20 billion capital expenditure RAPID project with an integrated refinery and petrochemical complex.
Next to this RAPID project, Petronas will add an export and import natural gas terminal.
Asia to become Canada first and cheerful customer
On the Canadian side, people might have preferred to do business as usual for these acquisitions between public and listed companies.
But among the listed companies which ones will offer more than $20 billion to acquire Nexen and Progress?
At $60 to $80 production and transportation costs per barrel of the oil sands in Canada, the American companies are now exploring and developing their own unconventional resources.
The successful experience of the shale gas is their best incentive to repeat it with tight oil.
Freezing or cancelling all the north to south pipelines projects, USA is switching from the Canada preferred customer statute to the fiercest competitor position.
ExxonMobil, BP and ConocoPhillips are working on giant LNG projects in Alaska to challenge the Apache, Shell and Haisla First Nation LNG projects in Kitimat.
On the Pacific coast, Oregon State is preparing construction ground for two LNG export projects for Veresen and Oregon.
In this context, the Canadian Authorities may recognize in the foreign investors CNOOC and Petronas to takeover Nexen and Progress their future cheerful best customers.
