China’s £11bn bid to become a major player in the North Sea

CASH-RICH China is to become a major player in the North Sea - including the operator of its biggest field – under two deals worth almost £11 billion announced yesterday.

State oil company China National Offshore Oil Corporation (CNOOC) is buying Canadian rival Nexen for £9.7bn in a blockbuster transaction which would represent China’s biggest-ever foreign corporate takeover.

Acquiring Nexen also would make the Chinese company the operator of the Buzzard oilfield, the largest in the UK.

In another deal also involving a Canadian firm, China-based Sinopec said it was buying a 49 per cent stake in the North Sea assets of Talisman Energy.

The two transactions are the latest in a series of swoops on British and western assets in recent months by private companies and the country’s £250bn sovereign wealth fund.

While indebted European governments have been courting China to 
persuade it to buy their bonds, 
Beijing has made clear it thinks assets are a more profitable investment, particularly given the woes facing many western economies is driving prices lower.

The Nexen move is the most ambitious foray by resource-hungry China into North American energy since a 2005 attempt to buy US-based Unocal was thwarted by a political backlash there.

CNOOC has only nine years worth of reserves based on its current production – one of the lowest ratios among major oil companies worldwide – and said the deal would increase its proven reserves by 30 per cent.

Analysts said if the deal goes ahead it would be a major coup for the Chinese. Yan Shi, at brokerage UOB Kay Hian in Shanghai, said: “CNOOC has been seeking overseas acquisitions, as the domestic reserves are limited. But there have been many limits such as foreign companies being reluctant to sell and prices being too high. This deal would be quite a success.”

CNOOC said it hoped to complete the deal by the fourth quarter of 2012.

Nexen, which employs 1,200 across the UK including an Aberdeen site and which plans to invest about £700m in capital spending in the North Sea during 2012, has been seen for some time by investment bankers as a potential target.

A CNOOC statement said the Nexen board unanimously approved the deal which will also need clearance from the Canadian government which can block any large foreign investments.

CNOOC will get unprecedented insight and access into the hugely influential oil benchmark market.

The Buzzard field is the biggest contributor to Forties Blend crude which is the largest of the four North Sea crude oils that form the Brent oil benchmark. It is also the crude that usually sets the value of dated Brent, the benchmark for pricing more than half of the world’s oil.

Talisman’s UK arm, which employs 564 staff along with almost 2,000 contractors, holds interests in 46 North Sea fields, operates 11 offshore installations and an onshore terminal.

Talisman said no reductions in the workforce were planned following the deal which will see it continue to operate the assets with Sinopec appointing “select personnel into key positions within the organisation”.