China National Offshore Oil Corporation

China National Offshore Oil Corporation
State-owned enterprise
Industry Oil and gas
Founded 1982 (1982)
Headquarters Beijing, China
Key people
 Wang Yilin (Chairman)
Li Fanrong (CEO)
Revenue IncreaseUS$98.53 billion (2014)
Number of employees
 98,750 (2011)[1]
Subsidiaries CNOOC Limited
China Oilfield Services
Website www.cnooc.com.cn

China National Offshore Oil Corporation, or CNOOC Group (Chinese: 中国海洋石油总公司 Pinyin: Zhōngguó Háiyáng Shíyóu Zǒnggōngsī), is a major national oil company in China. It is the third-largest national oil company in the People's Republic of China, after CNPC (parent of PetroChina) and China Petrochemical Corporation (parent of Sinopec). The CNOOC Group focuses on the exploitation, exploration and development of crude oil and natural gas in offshore China.

The company is owned by the government of the People's Republic of China, and the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC) assumes shareholder rights and obligations on the government's behalf. One subsidiary, CNOOC Limited, is listed on the Hong Kong exchange; the other, China Oilfield Services, is listed on the Hong Kong and New York exchanges.

History

When the State Council implemented the regulation of the people's petroleum resources in cooperation with foreign enterprises on January 30, 1982, CNOOC was incorporated and authorized to assume overall responsibility for the exploitation of oil and gas resources of offshore China in cooperation with foreign partners, which ensured monopoly status for CNOOC in offshore oil and natural gas. With its headquarters in Beijing, CNOOC registered with capital of RMB 94.9 billion and has more than 98,750 employees.[1]

Unocal buyout attempt

In June 2005 a CNOOC Group company (NYSE and Hong Kong-listed public company CNOOC limited) made an $18.5 billion cash offer for American oil company Unocal Corporation, topping an earlier bid by ChevronTexaco. Unocal's oil interests in Central Asia were considered a strategic fit for the company. On July 20, 2005 Unocal announced that it had accepted an buyout offer from ChevronTexaco for $17.1 billion, which was submitted to Unocal stockholders on August 10. On August 2 CNOOC Limited announced that it had withdrawn its bid, citing political tensions in the United States.[2][3]

Despite a hands-off approach from the Bush administration, a group of Democrats and Republicans in Congress organized opposition to the CNOOC Limited bid. They argued that with $13 billion of CNOOC Limited's bid for Unocal coming from the Chinese government, the offer was not a free market transaction. American corporations were prohibited from purchasing assets in China, and it was also argued that foreign, communist ownership of oil assets might be a regional and economic-security risk; Unocal had sensitive deep-sea exploration and drilling technology.[4] The Economist and other sources tried to discredit the security threat, and CNOOC was willing to undergo a US security review.[5] Congressional delays and calls for inquiry deterred the CNOOC Limited bid.[2][3]

The company was advised by Goldman Sachs.[6] CNOOC Limited had a reputation for acting independently of the Chinese government, and had not notified government officials before bidding for UNOCAL.[6] The political backlash in the United States caused the Chinese government to increase its oversight of Chinese companies, to avoid future risks to Sino-American relations.[6]

Two irregularly shaped greenish glass-faced buildings rise over a street lined with freshly budding trees on which a blue and white trolleybus is stopped
New company headquarters in Beijing, opened in 2006

CNOOC Limited faces challenges in the domestic market. Its rivals, CNPC and Sinopec, have been permitted to conduct offshore exploration once monopolized by CNOOC Limited. In accordance with the commitment by the Chinese government to join the World Trade Organization, the oil market will be opened to non-Chinese companies (such as Exxon Mobil and BP) by the end of 2006. CNOOC Limited's smaller domestic competitors have been trying to break the monopoly of the three major NOCs in the industry.

Nexen acquisition

Adding 61 percent to Nexen's July 20, 2012 stock price, on July 23 CNOOC agreed to buy Nexen for $15.1 billion (China's largest foreign deal).[7] The Canadian government's Investment Canada Act was used to determine if the sale was a "net benefit" to Canada.[8] In addition to Canadian authorities, the acquisition had to be approved by the Committee on Foreign Investment in the United States.[9] On 7 December the sale was approved by the Canadian government,[10] and on February 12, 2013 it was approved by U.S. regulators.[11]

2014 onwards

In June 2014, CNOOC agreed a deal with BP worth around $20 billion that would see the latter supplying the former with liquefied natural gas.[12]

Operations

CNOOC operates in six business sectors: exploration and development of oil and gas; technical services; logistic; chemical and fertilizer production; natural gas and power generation, and financial services and insurance. In 2004, the company generated revenue of RMB70.92 billion, a net profit of RMB 24.22 billion and RMB 12.09 billion in taxes (up 32 percent, 62 percent and 80 percent, respectively, from the previous year). By the end of 2004 total and net assets had reached RMB153.26 billion and 83.06 billion, a 28- and 21-percent increase from the beginning of the year. The company is fifth and twelfth in gross profits and total assets of state-owned enterprises in China. Standard & Poor's and Moody's Investors Service assigned CNOOC a long-term BBB+ and A2, equivalent to China's government rating and the highest rating for a Chinese company.

The exploration and production of oil and gas grew steadily in 2004. Output reached 36.48 million tons of oil equivalent, increasing 3.12 million tons (nine percent) over 2003. Domestic production was 24.72 million tons, an 11-percent increase from the previous year and higher than the average national growth rate of three percent. The annual output in Bohai Bay exceeded 10 million tons of oil equivalent for the first time, making it the second offshore area producing over 10 million tons (after the Eastern South Sea) and an energy-production base in northern China.

CNOOC has established CNOOC Gas and Power, which focuses on gas distribution and power generation. CNOOC has become China's dominant producer of liquefied natural gas. The company signed all mid- and downstream contracts for the Guangdong and Fujian LNG projects and imported 3.5 million tons per annum (MPTA) and 2.6 MPTA of LNG, respectively, from Australia's North Western Shelf (NWS) and Indonesia's Tangguh fields (operated by BP). LNG projects in Zhejiang and Shanghai began construction, and CNOOC signed HOAs for LNG cooperation with Liaoning, Tianjin, Hebei, Hainan and Jiangsu. CNOOC has completed its preliminary strategic natural-gas deployment in southern coastal areas up to the Yangtze River. In these projects, CNOOC is responsible for constructing LNG receiving terminals and trunk lines for gas transmission and gas-fired power plants.

In April 2004, the Ministry of Commerce authorized CNOOC-SINOPEC United International Trading to import crude oil; CNPC, Sinopec, Sinochem and Zhuhai Zhenrong had been the only companies importing crude. In July the NDRC approved the Nanhai Refinery Project, a joint venture between CNOOC and Royal Dutch Shell and the largest joint venture ever in China (with an annual capacity of 12 million tons). CNOOC had an integrated industrial portfolio as it expanded into refining. Shell built a $4.3 billion JV ethylene plant, but announced in 2007 that it would not build a $2.4 billion refinery.[13]

CNOOC Limited's share price rose by 37 percent in 2004, and its market capitalization reached RMB181.68 billion. CNOOC Engineering's share price on the Shanghai Stock Exchange rose by 66.11 percent, and the market capitalization of China Oilfield Services reached RMB10.1 billion. At the end of 2004 market capitalization of the three subsidiaries had approached RMB200 billion, 3.3 times their net assets. The company continued its operations in oil and gas exploration and development, exploitation of overseas resources, development of midstream and downstream business and modernization in 2005 with its goal an integrated, modern, competitive and profitable energy company by 2008.

Under ex-CEO Wei Liucheng (who was promoted to the governor of Hainan province in October 2003) and chairman and chief executive Fu Chengyu (傅成玉), CNOOC undertook a number of merges and acquisitions. It acquired five blocks in Indonesia from Spanish oil company Repsol in 2002, becoming its largest offshore operator. In 2003, it bought 5.3 percent of the NWS, ensuring supplies for the Guangdong LNG project; that year, it also acquired 12.5 percent of Tangguh to ensure supply to the Fujian LNG project. CNOOC tried to acquire 12.5 percent of Australia's Gorgon field to ensure supply to the Shanghai and Zhejiang LNG projects, but the parties could not agree on price.

According to SASAC, in December 2008 CNOOC made a light oil and gas discovery in the 100-million-ton class at its Jinzhou 25-1 field in Bohai Bay.[14] In May 2009, the company announced plans for a $4.38 billion coal-based natural-gas project in Shanxi.[15]

LNG terminals

CNOOC brought LNG to China with its Dapeng LNG Terminal in Guangdong, which received its first shipment (from the NWS LNG project in Australia) in July 2006.

Proposed CNOOC LNG terminals
Name Location Start date Capacity (MTPA) CNOOC share
Dapeng LNG Guangdong 2006 3.7 33%
Putian LNG Fujian 2007 2.6 60%
Yangshan LNG Shanghai 2008 3.0 45%
Ningbo LNG Zhejiang 2009 3.0 51%
Hainan LNG Hainan 2009 3.0 65%
Qinhuangdao LNG Hebei 2010 2.0 N/A
Binhai LNG Jiangsu 2010– 3.0 N/A
Yingkou LNG Liaoning 2010– 3.0 N/A
Zhuhai LNG Guangdong 2010– N/A N/A

Controversy

Drug-trafficking ties

In October 2004, contract-sharing was negotiated in Burma by Myanmar Oil and Gas Enterprise, China Huanqiu Contracting and Engineering Corporation and CNOOC's Singaporean joint-venture partner, Golden Aaron. Golden Aaron is run by Cecilia Ng, wife of Steven Law; Law is the son of Lo Hsing Han, known as the "godfather of heroin".[16] In 2008, the US Treasury intimated that CNOOC cooperates with a company run by a family known for heroin trafficking.[16]

Human-rights abuses in Burma

In 2007, CNOOC was involved in a clash with Burmese workers who threw stones at the company offices. Ten workers from Kyaukphyu were detained and questioned by authorities after a dispute with CNOOC over low wages, long hours,[16] reported underpayment and the mistreatment of inhabitants.[17]

In 2008, CNOOC was accused of abuses of human rights in Burma. Arakan Oil Watch stated in a report that the company "left behind such a trail of abuses and environmental contamination on Ramree Island that outraged locals attacked their facilities".[18] CNOOC's actions in Burma has been compared to that of communist officials in rural China, where entrepreneurs desiring development opposed by local residents steamroll their opposition.[18] The Shwe gas project, in particular, has been linked with land confiscation and human-rights abuses.[19]

Falun Gong persecution

CNOOC has been accused of participating in the persecution of Falun Gong by collaborating with the Chinese Communist Party to send Falun Gong CNOOC employees to labour camps and mind-control facilities, reducing their pay and preventing them from receiving benefits (or regular wages) unless they renounce their beliefs.[20][21][22]

Bohai Bay oil spill

On June 4, 2011 the U.S. company ConocoPhillips, operating in the Penglai 19-3 oilfield, caused an oil spill from a seafloor leak which lasted until June 7.[23] This was followed by a second leak on June 17, which was contained within 48 hours.[24] The leaks polluted a total of more than 840 square kilometers of clean water in Bohai Bay.[25] Fifty-one percent of the oilfield is owned by CNOOC, and forty-nine percent owned by ConocoPhillips.[24] The first leak was not made public until July 5, 2011.[25]

Huizhou refinery explosion

On July 11, 2011 an explosion occurred at the Huizhou refinery in the Daya Bay Economic and Technical Development zone in Guangdong. The refinery is 40 kilometres (25 mi) from the Daya Bay Nuclear Power Plant.[26]

References

  1. 1 2 "CNOOC-About Us-- Powered By SiteEngine". CNOOC. Retrieved 28 September 2012.
  2. 1 2 "Why China's Unocal Bid Ran out of Gas - Businessweek". Bloomberg Businessweek. August 3, 2005. Retrieved 28 September 2012.
  3. 1 2 White, Ben (August 3, 2005). "Chinese Drop Bid To Buy U.S. Oil Firm". The Washington Post. Retrieved 28 September 2012.
  4. ↑ "Congress Cites Security Concerns over Chinese Bid for Unocal". America.gov. 2005-07-19. Retrieved 2011-07-10.
  5. ↑ "Bogus fears send the Chinese packing". The Economist. August 2, 2005. Retrieved 28 September 2012.
  6. 1 2 3 Shirk, Susan L. (2007). China: Fragile Superpower. New York: Oxford University Press. pp. 250–251. ISBN 978-0-19-530609-5.
  7. ↑ "CNOOC Limited to buy Nexen for $15.1 billion in China's largest foreign deal". Reuters. July 23, 2012.
  8. ↑ Berthiaume, Lee (September 21, 2012). "Nexen takeover: National security a priority in foreign acquisitions, government says". Vancouver Sun. Retrieved 23 September 2012.
  9. ↑ Crooks, Ed; David Gelles (September 11, 2012). "Oil tie-up is test for US deal-watchers - FT.com". Financial Times. Retrieved 12 September 2012.
  10. ↑ http://www.canada.com/news/national/Government+approves+CNOOC+Nexen+Petronas+Progress+takeover+bids/7668195/story.html
  11. ↑ "Nexen Secures U.S. Approval of Its Sale to Cnooc of China". The New York Times. 12 February 2013.
  12. ↑ BP to sign $20 billion LNG supply deal with China's CNOOC, International: Reuters, 2014
  13. ↑ Oil Daily 9 Mar. 2007
  14. ↑
  15. ↑ industialinfo.com
  16. 1 2 3 "Treasury Sanctions On Myanmar Traffickers Implicate CNOOC". Forbes.com. 2008-02-27. Retrieved 2011-07-10.
  17. ↑ "CHINA-MYANMAR-INDIA Gas and oil from Africa and the Middle East will pass through Myanmar - Asia News". Asianews.it. Retrieved 2011-07-10.
  18. 1 2 "Chinese Oil Giant Accused of Human Rights Abuses in Burma". Irrawaddy.org. 2008-10-24. Retrieved 2011-07-10.
  19. ↑ Aug 26, 2009 (2009-08-26). "Asia Times Online :: Southeast Asia news and business from Indonesia, Philippines, Thailand, Malaysia and Vietnam". Atimes.com. Retrieved 2011-07-10.
  20. ↑ Canadian Falun Gong association claims Chinese company bidding for Nexen linked to human rights abuses Retrieved 30 October 2012
  21. ↑ Fletcher, Robson. "Falun Gong persecution a CNOOC deal-breaker, say protestors". Metro News (16 October 2012).
  22. ↑ Armstrong, Tim. "Nexen bidder CNOOC has a troubling record". Toronto Star (29 November 2012).
  23. ↑ "donga.com[English donga]". English.donga.com. Retrieved 2011-07-10.
  24. 1 2 "康菲公司正在制订赔偿方案_新闻中心_新浪网". News.sina.com.cn. Retrieved 2011-07-10.
  25. 1 2 F_129. "China needs zero tolerance for concealing major accidents". People's Daily. Retrieved 2011-07-10.
  26. ↑ South China morning post. 13 July 2011. CNOOC reports third oil spill into Bohai Bay in less than two months

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