March 6, 2013
CNOOC CEO Regrets "Misunderstandings" Over Foreign M&A
(Reuters) -- The head of Chinese oil and gas producer CNOOC Ltd. told an audience of executives in Houston on Tuesday that he hoped to overcome "misunderstandings" about the purpose of acquisitions made abroad by Chinese oil companies.
A week after closing its $15-billion takeover of Nexen Inc., CNOOC chief executive Li Fanrong said China -- the world's top oil importer as of December -- mainly wanted to increase its contribution to the supply side of the oil market.
In the West suspicion about sales of major assets to Chinese companies remains because of Beijing's controlling influence in the nation's corporate sector as well as anti-China sentiment among some lawmakers.
Canada approved the Nexen takeover even though some members of the governing Conservative Party had misgivings about it, while U.S. approvals dragged on as legislators examined whether the deal would threaten U.S. national security.
"We are supposedly doing this because we want to haul every bbl of oil back to China, or have other agendas rather than commercial reasons," Li said. "Everyone with knowledge of the global market system can easily figure out that is not true, simply because this notion does not make any commercial sense."
CNOOC, now the world's largest dedicated exploration and production company by market capitalization, has 40 per cent of its proved reserves outside China after the Nexen deal, Li said.
In a keynote presentation at the annual IHS CERAWeek conference, he said CNOOC's listing of shares in Hong Kong and New York had more to do with increasing transparency than raising money, since its growth has been funded by cash flow.
"The only difference with our international peers is I speak better Chinese than the rest of my partners," Li said.
Li said the deal was transformational for CNOOC and represented the "end of our beginning."
The Nexen acquisition gives CNOOC new offshore production in the North Sea, the Gulf of Mexico and off western Africa, as well as producing properties in Canada's Horn River shale.
China has huge potential reserves in shale rock, but Li said it would be between five and 10 years before the country saw any "step change" in shale development because the industry currently lacked the equipment and expertise.