by Vijay Sankaran
A Bloomberg Government Study, “China’s State-Owned Enterprises Surge Ahead in Oil-Rich Canada,” by financial analyst Vijay Sankaran (subscription required), examines the activities of China’s state-owned energy companies in Canada’s energy markets and the nature of their acquisitions.
A $15.1 billion offer on July 23 by Chinese energy company CNOOC to take over Canadian oil and gas company Nexen underscores the extent to which China’s state-owned energy companies are targeting Canada’s energy markets.
China’s aggressive acquisition strategy in Canada is posing a foreign policy dilemma for President Barack Obama, who last January denied a permit to expand an oil pipeline from Alberta to refineries on the Gulf Coast. It suggests that if Canada can’t find a way to sell its oil in the U.S., it has a ready and willing trading partner in China.
This Bloomberg Government Study examines the activities of China’s state-owned energy companies in Canada’s energy markets and the nature of their acquisitions. The study finds:
- Chinese cross-border merger and acquisition (M&A) activity reached $69 billion in 2011, up more than 500 percent since 2004. Almost half of the industry targets are related to natural resources.
- Chinese state-owned enterprises have invested more in Canadian oil and gas companies than U.S. companies since 2004.
- The majority of Chinese merger and acquisition activity in Canada’s energy sector is driven by three state-owned companies: CNOOC, PetroChina, and Sinopec.
The M&A activities of Chinese companies in Canada reflect two global trends that have taken shape since the late 1990’s: the boom of newly found natural resources in the Western Hemisphere, and the competitive emergence of state capitalism in commodity markets.
The balancing act for the U.S. involves energy security, environmental safety and geopolitical power. The next area of competition between the U.S. and China may take place in the Americas, due to the vast amounts of oil found on this continent and the energy consumption of both countries.
For more information, or to gain access to this study, contact the BGOV team.