China’s energy giants snap up British assets

City A.M. Reporter
CHINA made a grab for a large part of the North Sea’s oil and gas fields yesterday, bidding to take over Canada’s Nexen for $15.1bn (£9.7bn) and 49 per cent of the UK unit of Talisman for $1.5bn.

CNOOC, China’s state-owned oil producer, has agreed to buy Nexen in a cash deal worth $27.50 per common share, representing a 61 per cent premium to Nexen’s closing price in New York on Friday.

Meanwhile Chinese refiner Sinopec struck a deal to take a 49 per cent stake in Talisman’s North Sea assets and jointly operate the fields.

According to Dealogic, CNOOC’s deal is China’s largest-ever outbound deal in the energy sector, and the second-biggest acquisition ever by a Chinese company of a foreign one.

Neither firm put much emphasis in their statements on the importance of North Sea oil as a global benchmark while offering to pay hefty premiums. Brent crude, produced in the region, is used to gauge global values of the commodity.

“It is a material share of North Sea oil production,” said Lindsay Wexelstein, lead analyst at consultancy Wood Mackenzie.

WoodMac’s calculations showed both firms would directly own 13 per cent of all UK liquids production in 2012 if both deals went through.

Including production, which Nexen and Talisman operate, the two firms handle around 300,000 barrels per day, or almost a third of the dwindling UK North Sea oil output of roughly 1m bpd.

As well as the North Sea, Nexen owns assets in regions including Western Canada, the Gulf of Mexico and Nigeria, encompassing conventional oil and gas, oil sands and shale gas.

In order to sweeten the deal for Canadian regulators, CNOOC has promised to keep Calgary as the headquarters of Nexen’s North and Central American operations, and to keep on the current management team.