CNOOC defends Nexen acquisition

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HOUSTON, March 6 (UPI) -- China National Offshore Oil Corp.'s chief executive officer defended his country's global energy acquisitions.

The state-owned company last month completed its $15.1 billion purchase of Canadian energy producer Nexen.

In a keynote speech Tuesday at the annual IHS CERAWeek energy conference in Houston, Li Fanrong said there were misconceptions about CNOOC's overseas acquisitions and investments. He maintained that the company is committed to providing energy solutions to its customers and serving the world's needs.

The U.S. Energy Information Administration says the Nexen deal is China's largest overseas acquisition. Since 2009, the country's state-run oil and gas companies have purchased assets in the Middle East, North America, Latin America, Africa and Asia.

"The energy market is global," Li said in his speech, as reported by the Houston Chronicle.

He characterized countries and companies working together as "a powerful engine to drive our industry."

But one of the challenges, he said, is to overcome misunderstandings and foster better cooperation between and amongst energy companies, exporters and importers, service providers and financial firms.

Growth in energy markets worldwide is raising people out of poverty and generating new wealth, Li said.

Acknowledging that "oil and gas is a risky business," Li said the goal of the industry should be to take "advantage of our collaborative knowledge to meet tomorrow's demands for energy."

Canadian Prime Minister Stephen Harper approved the CNOOC-Nexen deal in December amid concerns about aggressive acquisitions in the country's oil industry by Chinese state-controlled oil companies. But he also warned that future acquisitions in Canada's oil sands would be restricted.

Under Nexen's new structure as a wholly owned subsidiary of the Chinese company, Li assumes the role of chairman.

When asked at the conference how long it might take for China to begin developing its shale gas, the CNOOC chief said it would be "very slow," perhaps five to 10 years, the Fort Worth (Texas) Star-Telegram reports.

China has 25.08 trillion cubic meters of exploitable onshore shale-gas reserves, China's Ministry of Land Resources has said.

But Xizhou Zhou, director of China energy for IHS, pointed to the specific challenges of Chinese shale.

While China likely has more shale deposits than the United States, Xizhou said, the Chinese government owns the mineral rights, there are no pipelines and producers aren't sure that the retail price of oil and gas will be regulated at low levels to satisfy consumers.

There are "a lot of above-ground risks" in China, and shale development is probably seven to eight years away, Xizhou said.