Media Coverage
Source: Business News Network
Media Coverage
10.11.12
Robert James, a partner with Pillsbury’s Finance Section in San Francisco, was interviewed by Canada’s Business News Network on state-owned oil companies, in light of the bid by China National Offshore Oil Corporation (CNOOC) for Nexen. James, who has represented both state-owned and investor-owned oil companies on energy project developments and acquisitions, and the author of an article on strategic alliances between the two types of entities, discussed the controversy over whether state-owned oil companies are tools of their government owners or whether they are entities on their own.
James suggested that CNOOC was likely more answerable to outside investors than many other state enterprises because of their business model. Still, he said, the company is still subject to state policies at the most broad levels.
“What we find is that the key element is whether these companies have the ability to reinvest or whether they have to remit all of their oil proceeds to the federal government and then seek money back; whether they’re able to chart their own course for the necessary long term investments required for exploitation of major complex resources, such as Canada’s oil sands,” James said.
When asked how to evaluate which oil companies are resilient for future endeavors, James said one test is if they’re already doing business internationally. Along those lines, he noted how CNOOC, in particular, has led the way and others in China are now having similar international aspirations. In other cases where their focus is only one country, as in Mexico and several African countries, state-owned entities may have less control over their future because oil proceeds are essentially an auxiliary of the state budget.
On the question of CNOOC specifically, James was asked if he thinks Canada has anything specific to worry about with this potential merger, given that the company wants to make such a large investment in Canada’s energy sector, specifically in oil sands. Among other concerns and factors, James pointed to possible upsides of such a deal.
“[The analysts] identify a couple of potential synergies besides just the portfolio move of the ownership of Nexen from one owner to another,” James said. “They suggest that it may facilitate the development of West Coast export facilities for all sorts of natural resources, either from British Columbia or the U.S., creating a greater flow of goods and materials of all types, not just oil, from the West Coast to Asian markets.”
James added, “The second [synergy] they identify is the possibility of greater exploration and development opportunities for Canadian, North American and other companies in China, with some sense of reciprocity. I don’t think you can guarantee that will happen simply because of approval of one Nexen deal, but it will be watched and it will be the litmus test of whether their commitments … are really followed through [on].”