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China Seeks New Technology in Oil Deal

Tar¹ sands projects run by Nexen are one reason the Canadian oil company is being offered $15 billion by the China National Offshore² Oil Corporation or CNOOC.

Besides oil sands, Nexen has deepwater drilling operations along the U.S. Gulf³ Coast and assets in Europe's North Sea and elsewhere.

Economic analyst⁴ Andrew Holland, of the American Security Project, says China needs new technology to squeeze more energy out of its oil and gas fields.

"This new technology will open some onshore oil and especially offshore oil. There are some real technology gaps between Western companies and CNOOC," Holland said.

The head of an oil exploration and production company says it is tough to get energy out of shale⁵ rock, tar sands, or wells in very deep water. Chris Faulkner, the CEO of Breitling Oil, says Nexen has the skills China needs.

"When you are operating in those kinds of extreme environments, that’s the latest and greatest technology that exists in our industry," he said. 

The CEO of Armada Oil, Jim Cerna, says better technology could help China tap more energy from its existing reserves. 

"Shale deposits in northwest China could be some of the biggest in the world. There needs to be some advanced technology applied⁶ to that, and they could be sitting on a massive reserve," he said.

A previous Chinese effort to acquire the U.S.-based oil firm Unocal failed in 2005 when it sparked strong political opposition⁷ in the United States.

So far, there is less opposition this time, but some members of the U.S. Congress say Beijing wants to invest in North America while placing unfair obstacles on U.S. investments in China.

Analysts⁸ say China is trying to avoid political problems by keeping Nexen's staff and promising⁹ continued investment and research in North America. But business analyst and author Handel Jones of International Business Strategies says CNOOC may still encounter problems.

"I think there is going to be a high probability of resistance, and my feeling is that, probably, parts of Nexen will have to be split off for the deal to go through. I don’t think the U.S. is at all happy with Nexen having a fairly strong position in the Gulf of Mexico," Jones said.

But even critics admit China's investments in foreign oil companies are helping¹⁰ increase global energy supplies and tend to keep prices from rising.