After several reports of overseas acquisitions, CNOOC is making new moves.
On October 22, according to foreign media reports, CNOOC beat American oil giant ExxonMobil and joined forces with Ghana National Petroleum Corporation to acquire the oil and gas assets owned by Cosmos Energy in Ghana, as well as its shares in the Jubilee oilfield development project. The acquisition amounted to as high as $5 billion, approximately equivalent to 33.287 billion yuan.
Cosmos Energy, headquartered in Dallas, mainly operates in Africa, especially owning several oil and gas block development rights in West Africa. The company holds a 23.5% stake in Ghana's Jubilee oilfield. Preliminary estimates suggest that the oilfield contains up to 1.2 to 1.8 billion barrels of crude oil, making it one of the largest oilfields discovered in West Africa over the past decade.
According to foreign media citing three unnamed insiders, the three companies signed relevant agreements two weeks ago. The joint bid from CNOOC and Ghana National Petroleum Corporation was $1 billion higher than ExxonMobil's offer.
However, whether this deal will proceed smoothly remains uncertain.
Reports indicate that Ghana National Petroleum Corporation is still in contact with Norway's largest oil company, Statoil ASA, intending to include them as a bidding partner, without CNOOC participating in these negotiations. Additionally, Cosmos Energy is also implementing a financing plan, and their stance remains unclear.
When contacted, relevant personnel from CNOOC declined to comment on this matter.
Beating ExxonMobil
The Jubilee oilfield, with reserves reaching world-class levels, once attracted attention from major oil giants such as France's Total, BP, Sinopec, Chevron, and Sweden's Lundin Petroleum. As competition intensified, the ownership of Jubilee oilfield equity became increasingly unpredictable.
Discovered in 2007, according to Ghanaian media, the oilfield is expected to produce 120,000 barrels of oil per day, inject 230,000 barrels of water daily, and produce 160 million cubic feet of natural gas daily. Construction of the floating production, storage, and offloading vessel and subsea facilities began in July 2008, with plans to deliver the first oil in the second half of 2010.
In the oilfield development project, Irish Tullow Oil, acting as the operator, owns 34.70% of the rights. Other partners and their respective stakes are: U.S.-based Cosmos Energy (23.49%), Anadarko Petroleum (23.49%), Sabre Oil & Gas (2.81%), EO Group (1.75%), and Ghana National Petroleum Corporation (13.75%, including 10% carried interest).
In July 2009, one of the Jubilee oilfield developers, Cosmos Energy, expressed an intention to sell a 23.5% stake in the project to raise funds.
Subsequently, the world's largest oil giant, ExxonMobil, reached an exclusivity agreement with Cosmos Energy. In early November 2009, Cosmos announced signing an agreement with ExxonMobil to sell its stake in the Jubilee offshore oil extraction for $4 billion. However, Ghana's Ministry of Energy and Ghana National Petroleum Corporation responded by declaring the agreement illegal and unacceptable. Ghana National Petroleum Corporation also disclosed plans to reclaim Cosmos' shares in the Jubilee oilfield.
Analysts believe that Ghana National Petroleum Corporation hopes to have partial rights in the project. A senior executive at Ghana National Petroleum Corporation stated that after independently acquiring Cosmos' equity, they are willing to cooperate with other oil companies in operating the project.
Thus, the battle for Jubilee oilfield equity intensified, with Sinopec, Sweden's Lundin Petroleum, and other oil giants subsequently submitting bids to the Ghanaian government. Ghana's Deputy Minister of Energy, Kweku Danker, revealed that international oil groups expressing interest in the Jubilee oilfield project numbered over 50.
As French Total and other oil giants successively announced withdrawal, CNOOC became ExxonMobil's biggest rival.
Wang Aochao, an analyst at Singapore investment firm UOB-Kay Hian Ltd., told Bloomberg: "Compared to ExxonMobil and BP, CNOOC has less experience in developing oilfields in Africa, but CNOOC is willing to offer a higher price and has partnered with Ghana National Petroleum Corporation, which are key reasons for its success."
Accelerated Overseas Acquisitions
In 2005, after CNOOC's attempt to acquire Unocal through its listed subsidiary China National Offshore Oil Corporation for $18.5 billion was blocked, the company, holding ample cash, has been searching for acquisition targets overseas.
In March of this year, CNOOC spent $3.1 billion to acquire a 50% stake in Bridas Corporation, a wholly-owned subsidiary of Argentina's second-largest oil and natural gas company, Bridas Energy Holdings.
In mid-September, news emerged that CNOOC would spend $10.2 billion to acquire BP's 60% stake in Pan American Energy in Argentina.
On October 11, CNOOC announced that its wholly-owned subsidiary, China National Offshore Oil International Limited, would acquire a 33.3% interest in Chesapeake Energy's Eagle Ford shale oil and gas project for $1.08 billion in cash.
CNOOC's overseas expansion efforts are accelerating. Besides Pan American Energy, currently, CNOOC is separately competing with Sinopec to acquire a 20% stake in an offshore oilfield in the Campos Basin held by Brazil's rising oil star OGX.
After years of preparation, CNOOC's financial reserves are now sufficient. Compared to the two major domestic oil giants, although its pace of overseas acquisitions has been relatively slower, as the impact of the financial crisis gradually dissipates, CNOOC's overseas acquisition business has restarted.
CNOOC's semi-annual report shows that the company's capital expenditures were only $2.113 billion in the first half of the year, far below the full-year planned expenditure of $7.776 billion.
"Having readjusted its external strategy, CNOOC has made several recent moves, indicating the company now possesses sufficient acquisition capabilities. We may see even larger acquisitions from CNOOC next," said an industry insider.
Sources close to CNOOC revealed that for large overseas projects, the company has been actively tracking them for the past couple of years, waiting for the right opportunity.
"As to how far along these discussions are, only CNOOC itself knows," the source added.