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China's Oil Hunger Hits $15 Billion in Canada Amid U.S. Diet Deals

CNOOC's bid for Nexen may still be worth watching for U.S. investors and energy players. Benchmark analyst Mark Gilman said in November that Chinese M&A interest in North America is at least partially about acquiring the technological expertise required from complicated deepwater and shale drilling. The same could be said of ExxonMobil's acquisition of XTO Energy, seen as not only an asset play but a shale drilling expertise and technology acquisition.

Gilman noted the key to deals will be the size of new shale finds and the emergence of new types of drilling methods like fracking. "You have to keep half an eye on the frequency on which new plays are emerging...[In terms of shale], we are talking about a business that has emerged in the last two to three years and has exploded on the scene," said Gilman.

Sinopec's acquisition of a stake in Petrogal Brasil includes access to the Jupiter and Tupi offshore oil fields -- the largest oil finds in the western hemisphere since the 1970s. The push into what is known as the Brazilian pre-salt, adds to a legacy of Chinese oil ventures with established players in hard to drill areas.

More recently, Sinopec bought a 33% interest in five shale ventures owned by Devon Energy for $2.2 billion, giving it access and a drilling partner in prized shale assets like the Tuscaloosa Marine , Niobrara, Mississippian, Ohio Utica and the Michigan Basin shale formations.

The head of China's Sinopec was recently seated next to Chesapeake Energy CEO Aubrey McClendon at an NBA Finals game. Chesapeake Energy is looking to sell billions in shale assets as a way to meet a $10 billion-plus funding gap this year. There have been reports that the recent visit by Sinopec's CEO Fu Chengyu to Chesapeake's hometown of Oklahoma City was the prelude to an asset acquisition.

Estimates for the potential oil and gas trapped in Chinese domestic shale vary, but there are expectations that the Chinese energy companies will develop in the coming years a significant domestic shale drilling industry.

Unlike many Chinese acquisitions and joint ventures focused on assets in one drilling region or at least one country, Monday's acquisition of Nexen provides CNOOC access to oil and gas assets around the world, including in Canada, West African countries, and access to prized U.S.-based Gulf of Mexico deepwater and continental shale drilling opportunities.

Cannacord Genuity analyst Phil Skolnick said the market is likely to see this as a positive indicator of the ability of Talisman Energy (TLM) to be acquired given it has a mixture of international assets (TLM's Asia assets in particular are potentially of interest). However, he noted that Talisman lacks the oil sands exposure of Nexen, which on its own makes Nexen a more attractive target. On Monday, Talisman announced that it was selling a 49% stake in its U.K. North Sea business to Sinopec for $1.5 billion.
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