By Alexis Flynn
LONDON --Two state-backed Chinese companies said Monday they
have agreed to $16.6 billion of acquisitions that would give them
roughly an 11% share of the U.K.'s oil and gas production,
dramatically expanding the Asian giant's presence in the country's
resource sector.
The deals are the latest in a string of acquisitions aimed at
sating China's hunger for foreign energy assets, but unlike past
takeovers that have provoked political opposition, U.K. government
and industry have initially welcomed the companies'
investments.
Cnooc Ltd. (CEO), unveiled early Monday a $15.1 billion deal to
take over Canadian-listed Nexen Corp. (NXY), which is the U.K.'s
largest oil producer. Within hours, a separate deal was announced
by Talisman Energy Inc. (TLM.T), which agreed to sell 49% of its
U.K. business to China Petroleum & Chemical Corp., better known
as Sinopec (0338.HK), for $1.5 billion.
If both acquisitions pass regulatory and shareholder approval,
they would give the state-backed Chinese companies a significant
role in the U.K. oil and gas industry. According to company
reports, Nexen and Talisman's net share of production from their
fields in the U.K. in the first quarter of 2012 was respectively
114,000 barrels a day equivalent and 132,000 barrels a day
equivalent of oil and gas, around 11% of the country's total.
Cnooc's acquisition of Nexen would give it a particularly
dominant position. Nexen operates the U.K.'s largest oil field,
Buzzard, which alone produced 193,000 barrels a day in March, 21%
of total U.K. oil output, according to data from the U.K.
Department of Energy and Climate Change. Buzzard is a major
component of the Forties crude system, which in turn is the largest
element of international oil price benchmark Dated Brent. Nexen
owns 43% of Buzzard.
Nevertheless, government and industry were quick to welcome the
deals and downplayed any risks to the security of the country's
energy supply.
"The U.K. is open for business and actively welcomes inward
investment to our energy sector," said DECC in a statement.
Malcolm Webb, Chief Executive of industry body Oil and Gas U.K.,
said the deals were further confirmation of the remaining potential
held in the North Sea, which is one of the world's most intensively
developed oil and gas basins.
"A diverse range of investors in the province will help maximize
recovery of the U.K.'s substantial remaining oil and gas resource,
to the benefit of British jobs, tax revenues, export earnings and
energy security," said Mr. Webb.
"Collectively, we will invest more in the U.K. than Talisman
would have on its own, leading to a stronger, more sustainable
business," said Talisman Chief Executive John Manzoni.
The leader of the U.K.'s main offshore workers' union, Jake
Molloy, also welcomed the deals, but stressed the need for the new
firms to continue to invest in maintaining the structural integrity
of some of the North Sea's oldest offshore installations.
Despite the scale and suddenness of the Chinese acquisitions,
the government said the deals would be treated no different to any
other. "All operators of U.K.-based oil and gas infrastructure are
required to meet our tough domestic regulatory standards," DECC
said.
Paul Stevens, an energy expert at London think tank Chatham
House, said fears the deals posed a risk to U.K. security of energy
supply were overblown.
Oil produced by the companies would simply go onto the open
market, and wouldn't affect U.K. supplies any more than if Nexen
and Talisman had done similar deals with other foreign firms, he
said.
Chinese companies already have a significant presence in other
U.K. resource sectors. In 2010, a Chinese consortium acquired three
local U.K. electricity networks that distribute around a third of
the power in the country. Last year, a consortium led by Cheung
Kong Infrastructure Holdings Ltd (1038.HK) bought the U.K.'s
Northumbrian Water Group PLC, which provides water and sewerage
services to 4.5 million people. China's Guangdong Nuclear Power
Holding Company and France's Areva SA (AREVA.FR) are making a joint
bid to develop nuclear power plants in the U.K.
-- Write to Alexis Flynn alexis.flynn@dowjones.com (Selina
Williams and James Herron contributed to this report.)
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