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

prevention is better than cure! Beijing will reduce its dependence on the West, as is evident from the view of the CNOOC, the Chinese oil and gas giant, which will sell all its shares in Great Britain, Canada and the United States, reveals the Reuters agency. Threatened in return for sanctions for its support for Russia, itself subject to a Western sanctions since the military invasion of Ukraine, Beijing seeks to prevent some of its assets from being confiscated abroad.

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

By purchasing Canadian manufacturer Nexon for $15.1 billion in 2012, CNOOC, which has a state enterprise status, became one of the world’s leading producers of hydrocarbons.

220,000 barrels of oil equivalent per day

Ex-Nexon assets – a name that disappeared in 2019 to be integrated into the CNOOC brand – include shale hydrocarbon exploration offshore, offshore fields in the North Sea, a stake in northeast British Columbia’s shale gas. At the Soderglen Wind Farm in Newfoundland and Labrador or southern Alberta, Canada. In the United States, CNOOC has assets in the onshore Eagle Ford and Rockies Shale basins, as well as interests in two large offshore fields, Appomattox and Stampede, in the Gulf of Mexico. Cumulative production is about 220,000 barrels of oil equivalent per day (boed) according to Reuters calculations. Outside of China, CNOOC is present in approximately twenty countries.

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In March, Reuters had already indicated that the Chinese giant had ordered Bank of America to prepare a sale of its assets in the North Sea, including a stake in one of the basin’s largest areas.

Last October, its withdrawal from the New York Stock Exchange was finalized. CNOOC was among the Chinese companies that the Trump administration targeted in 2020 because they were controlled by the Chinese military. It should be listed on the Shanghai Stock Exchange this month, so that it can continue to finance itself.

However, CNOOC is not ruling out developing internationally. The Chinese major will seek to acquire new assets in Latin America and Africa, and will prioritize the development of new offshore projects in Brazil (where it collaborates with Petrobras and Shell), in Guyana (with Exxon and Hesse) and Uganda. In and Tanzania (with TotalEnergies), according to sources cited by Reuters.

A new configuration of globalization

CNOOC is among the top five oil companies in the country with assets outside the country, along with CNPC, Sinopec, Yang Chang Petroleum and Sinochem Group.

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, both diplomatically and commercially. This prospect prompts China to secure supplies vital to its economic growth.

Thus, the country consumes more and more oil. According to the latest monthly report from the International Energy Agency (IEA), it should burn 15.7 mbd (+9.1%) in 2022, after 13.1 million barrels per day (mbd) in 2021. And even though it has increased its local production (see graph), it is largely insufficient to meet the needs of petroleum products in particular.

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

The urgency of finding an outlet for Russia

With regard to the figures for February and March, the IEA notes that at present such quantification has not yet materialized. “It remains to be seen whether Asian buyers will be able to absorb Russian crude and petroleum products that used to be bought by Europe and are banned in the US, UK, Canada and Australia. Without full redistribution, Russia may have to stop. Further oil production with potential long-term consequences for global supply”Explains the IEA, which forecasts a drop in Russian production to 1.5 mb/d in April and then about 3 mb/d in May.

In fact, the urgency to find an outlet for its hydrocarbon imports is first and foremost on Russia compared to its Asian customers. China, which is under pressure from Washington, is taking the first lessons from the Ukrainian conflict and starting preparations, just in case.