A state-owned Chinese energy giant announced in July it had reached a $15-billion deal to buy Nexen, a Canadian energy firm with holdings in the Alberta tar sands and expertise in drilling for shale gas. The deal is just a recent example of China snatching up energy firms around the world as much for their expertise as for their earning potential.
China is sitting one of the world’s richest shale reserves but does not possess the technology to extract the natural gas and bring it to market. After CNOOC’s attempted hostile takeover of the American gas company Unocal failed in 2005 when the U.S. government denounced it as a threat to national security, Chinese companies have been more diplomatic in their first steps toward dominating the world energy market.
According to The Economist, Chinese companies have spent $5.9 billion since 2010 to secure minority stakes in American energy firms. When purchasing majority stakes, the Chinese have clearly learned their lesson, gaining the full support of Nexen’s board of directors and offering a premium of over 60 percent for shareholders. In purchasing Nexen, the Chinese have not only purchased the opportunity to explore Canada’s Alberta tar sands, they have also purchased the necessary expertise for shale gas exploration in China.
The number of China’s outbound energy mergers and acquisitions has more than tripled since 2007, and experts say the biggest deals may be yet to come.