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The transaction, expected to be finalized in the fourth quarter, has received the unanimous approval of the two companies' boards of directors. Lu Bo, Deputy General Manager of CNOOC, said the bid to buy Nexen is normal market behavior and the company will strictly follow market procedures in the acquisition process. The company is confident about completing the deal.
"The most basic point is that the two sides freely agreeing to make this deal is a good thing. It is how market economies should work," said Derek Scissors, a senior research fellow on Asian economics with the Heritage Foundation, a conservative think tank based in Washington, D.C.
"Blocking the Unocal deal was a mistake. As with Nexen, CNOOC's bid for Unocal was freely agreed to. Its rejection by the U.S. government merely caused CNOOC to invest elsewhere. American participation in Chinese investment was delayed a few years," he said.
"The deal is poised to benefit both sides. For the Canadian side, Sino-Canadian energy cooperation would help to stimulate Canada's employment and its economic recovery," Dong said.
The generous terms offered by CNOOC to Nexen could not only solve the current problems of the Canadian company but will also strengthen its capacity in energy development, Jia said. What's more, the deal will help Canada to greatly expand its energy exports.
Nexen, as one of the major Canadian oil producers, has 2 billion barrels of proven and probable reserves. It has a substantial operating business in the Alberta oil sands and also operates in Britain's North Sea, the Gulf of Mexico in the United States and West Africa's Nigeria.
Jia said, "If the deal is completed, CNOOC's reserves will exceed 10 billion barrels, which will greatly promote its strength and expand its market share. The case will also lay a good foundation for Chinese enterprises to enter Western markets en masse and help to eliminate the shadow caused by the Unocal deal."
"The acquisition reflects our strong belief in Nexen's rich and diverse portfolio of assets and world-class management and employees. This is an exciting opportunity for us to build on our existing joint venture relationship with Nexen in Canada and to acquire a leading international platform in the process," CNOOC Chairman Wang Yilin said.
"Besides increasing its profitability, the acquisition of Nexen will help CNOOC to acquire expertise in deep-sea oil exploration and shale gas extraction," Dong said.
China has huge reserves of shale gas and other unconventional fuels. The key problem is in developing ways to better exploit these resources.
Currently, the deal is still under review by the governments involved, but observers believe their interest in the stable investment China brings will outweigh concerns.
For political reasons and the interests of some oil producers, there remain voices that are against the deal in the United States. Western media reports say some of the same U.S. politicians who voiced opposition to the Unocal deal, including Senators Charles Schumer and James Inhofe and Representative Edward Markey, have already lined up against the Nexen one.
"The deal won't form any challenge for U.S. national interest or national security. The United States should not worry so much about overseas investments by Chinese companies operating in the global market following market rules," Jia said.
Dong said, "U.S. assets only account for 10 percent of Nexen's total assets. Even if acquisition was rejected by the U.S. Government, it might still be carried out by stripping those assets, which could have a negative effect on the U.S. economy and employment."
CNOOC Profile
- Employees: 5,377
- Total assets: 384.26 billion yuan ($60.48 billion )
- Proven reserves: 3.19 billion barrels of oil equivalent
- Average daily production: 909,000 barrels of oil equivalent
(Source: www.cnoocltd.com, as of December 31, 2011)
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