China Makes Another Gigantic Oil Bid

china yuan money cash dollars

Chinese oil company CNOOC is looking to purchase more oil, reports the Financial TImes.

The oil major wants to buy 6 billion barrels or 1/6 of Nigeria’s oil for between $30-$50 billion, according to documents seen by the FT. The deal puts CNOOC in direct competition with western oil companies like Exxon, Shell and Chevron. If completed, it would be the biggest deal by a Chinese oil company yet.

Because China will be competing with western oil companies, in particular companies based in the United States, the deal is no slam dunk.

There are larger forces than commercial logic at play. A deal with the Chinese of the magnitude under discussion would be a snub to the US, for whom Nigeria is not only the fifth-biggest supplier of oil but a perceived hedge against volatility in the Middle East. But Nigeria has already alarmed the European Union by signing a $2.5bn gas deal with Gazprom of Russia.

Turning east presents difficulties too, however. Chinese companies may have less technical knowhow than their western rivals. Some Nigerian officials worry that the Chinese practice of importing staff will exacerbate resentment in the delta, where grievances over the lack of opportunities afforded to locals have fed years of upheaval and attacks on western groups.

What China does have is cash, and its thirst for oil to fuel breakneck growth means that it appears prepared to pay over the commercial odds – giving it an advantage over the western oil companies.

Continue at FT>

 

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