China prepares its rear, CNOOC, the Chinese energy giant, sells all its assets in North America

It’s better to prevent than to cure! Beijing will reduce its dependence on the West, as illustrated by the approach of CNOOC, the Chinese oil and gas giant, which will sell all its holdings in Great Britain, Canada and the United States, reveals the Reuters agency. Threatened in turn with sanctions for its support of Russia, subject to a Western embargo since its military invasion of Ukraine, Beijing wants to prevent some of its assets from being seized abroad.

China has not only refused to condemn the Russian operation but also intends to maintain good relations with Russia, whose hydrocarbons and other raw materials are of interest to it to ensure its supply.

By acquiring the Canadian producer Nexen in 2012 for $15.1 billion, CNOOC, which has state-owned company status, had positioned itself among the world’s leading hydrocarbon producers.

220,000 barrels of oil equivalent per day

The assets of the ex-Nexen – the name disappeared in 2019 to integrate into the CNOOC brand – include interests in offshore fields in the North Sea, in the shale gas of northeastern British Columbia, in the exploration of shale hydrocarbons off the coast of Newfoundland and Labrador or at the Soderglen Wind Farm in southern Alberta, Canada. In the United States, CNOOC has assets in the Eagle Ford and Rockies shale basins onshore, as well as interests in two large offshore fields in the Gulf of Mexico, Appomattox and Stampede. Cumulative production is about 220,000 barrels of oil equivalent per day (boed), according to Reuters calculations. Outside of China, CNOOC is present in twenty countries.

In March, Reuters had already indicated that the Chinese giant had given a mandate to Bank of America to prepare the sale of its assets in the North Sea, which include a stake in one of the largest fields in the basin.

Last October, its exit from the New York Stock Exchange was completed. CNOOC was among the Chinese companies targeted by the Trump administration in 2020 because they were controlled by the Chinese military. It should list on the Shanghai Stock Exchange this month, so it can continue to be funded.

However, CNOOC does not renounce to develop internationally. The Chinese major will seek to acquire new assets in Latin America and Africa, and will give priority to the development of new offshore projects in Brazil (where it cooperates with Petrobras and Shell), in Guyana (with Exxon and Hess) and in Uganda and Tanzania (with TotalEnergies), according to sources cited by Reuters.

A new configuration of globalization

CNOOC is one of the five largest oil companies in the country, with CNPC, Sinopec, Yang Chang Oil et Sinochem Groupwith assets held outside the country.

The rivalry with the United States, which has taken on a new dimension with Western sanctions against Russia, could lead to a new configuration of globalization diplomatically than commercial. This perspective pushes China to secure its vital supply for its economic development.

Thus, the country consumes more and more oil. After 13.1 million barrels per day (mbd) in 2021, it should burn 15.7 mbd in 2022 (+9.1%), according to the latest monthly report from the International Energy Agency (IEA). And even if its local production has increased (see graph), it is still largely insufficient to cover needs, particularly for petroleum products.

chinese oil production

This is one of the reasons that will push China, but also India and other Asian countries, to develop purchases of Russian oil, especially since they are sold at a discount.

Urgency to find a way out for Russia

For the moment, such a movement of magnitude has not yet materialized, the IEA points out with respect to the data for February and March. “It remains to be seen whether Asian buyers will be able to absorb the Russian crude and oil products that Europe used to buy and that are banned in the US, UK, Canada and Australia. Without full reallocation, Russia may have to increased oil production with potential long-term consequences for global supply”explains the IEA, which forecasts a drop of 1.5 mb/d in April and after almost 3 mb/d in May in Russian production.

In fact, the urgency of finding an outlet for its hydrocarbon imports is imposed above all on Russia rather than on its Asian clients. China, which is under pressure from Washingtonis learning the first lessons of the Ukrainian conflict and is starting to prepare, just in case.