China National Offshore Oil Corporation
|This article is outdated. (July 2012)|
||This article may require copy editing for style and corporate promotion. (July 2012)|
|Industry||Oil and gas|
|Key people||Wang Yilin (Chairman)
Yang Hua (CEO)
China Oilfield Services
China National Offshore Oil Corporation (CNOOC Group Chinese: 中国海洋石油总公司 Pinyin: Zhōngguó Háiyáng Shíyóu Zǒnggōngsī) is one of the major national oil companies of China. It is the third-largest national oil company in the People's Republic of China after CNPC (parent of PetroChina), and China Petrochemical Corporation (parent of Sinopec). The CNOOC Group focuses on the exploitation, exploration and development of crude oil and natural gas offshore of China.
The CNOOC Group is a state-owned oil company, fully owned by the government of the People's Republic of China, and the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC) performs the rights and obligations of shareholder on behalf of the government. Its subsidiary, CNOOC Limited, is listed on the Hong Kong exchange, while its other subsidiary, China Oilfield Services, is listed on both the Hong Kong and New York exchanges.
When the State Council promulgated the Regulation of the People's Petroleum Resources in Cooperation with Foreign Enterprises on January 30, 1982, CNOOC was incorporated and authorized to assume the overall responsibilities for the exploitation of oil and gas resources offshore China in cooperation with foreign partners, which in effect ensured the monopoly status of CNOOC in offshore oil and natural gas industry. Headquartered in Beijing, CNOOC registered with a capital of RMB 50 billion and now has more than 98,750 employees.
Unocal buyout attempt
In June 2005, one of listcos under the CNOOC Group, the NYSE and Hong Kong listing public company CNOOC limited, made an all-cash $18.5 billion offer to buy American oil company Unocal Corporation, topping an earlier bid by ChevronTexaco. Unocal's extensive oil interests in Central Asia were considered to be an excellent strategic fit for CNOOC Limited. On July 20, 2005, Unocal announced that it had accepted an increased buyout offer from ChevronTexaco for $17.1 billion. This decision was submitted to a vote by Unocal stockholders on August 10, 2005. On August 2, CNOOC Limited announced that it had withdrawn its bid, citing political tension inside the United States.
Despite a hands-off approach from the Bush Administration, a broad group of Democrats and Republicans in Congress organized opposition to the CNOOC Limited bid. They argued that with $13 billion of CNOOC Limited's bid for Unocal coming from the Chinese government, the offer did not represent a free market transaction and had questionable motives. Furthermore, a lack of reciprocity was pointed out as American corporations were prohibited from purchasing analogous assets in China. It was also argued that the foreign and particularly communist ownership of oil assets could represent a regional and economic security risk. Unocal also had sensitive deep-sea exploration and drilling technology with dual-use potential. The Economist and other sources attempted to debunk the security threat, while CNOOC was willing to submit to a US security review. Congressional delays and calls for extensive inquiry into the matter deterred the CNOOC Limited bid significantly.
CNOOC Limited was advised by Goldman Sachs in the set up by Western leading companies. CNOOC Limited at the time had a reputation for acting independently of government control, and in fact had not notified Chinese government officials prior to making the bid for UNOCAL. Ironically, the political backlash aroused in the United States caused the Chinese government to increase the oversight of the commercial activities of Chinese companies to avoid future risks to the Sino-American relationship.
CNOOC Limited also faces tough new challenges in the domestic market. Its rivals CNPC and Sinopec have recently been granted approval to conduct offshore explorations once monopolized by CNOOC Limited. Furthermore, in accordance with the commitment made by the Chinese government to join the World Trade Organization, the retail and wholesale market of oil will be further opened to non-Chinese companies by the end of 2006. Large foreign energy firms, such as Exxon Mobil and BP, will more easily make inroads. At the same time, CNOOC Limited's smaller domestic competitors have been attempting to end the current monopoly of the three major NOCs in the industry.
With a 61 percent premium to Nexen's July 20, 2012 stock price, on July 23, 2012 CNOOC Ltd agreed to buy Nexen Inc for $15.1 billion as China's largest foreign deal. The Canadian Government's Investment Canada Act was used to determine if the sale provides a "net benefit" to Canada. In addition to Canadian authorities, the acquisition must also be approved by Committee on Foreign Investment in the United States. On 7 December 2012, the sale was approved by the Canadian federal government. On February 12, 2013, the sale was approved by the U.S. regulators.
CNOOC has established six business sectors ranging from exploration and development of oil and gas, technical services, logistic services, chemicals and fertilizer production, natural gas and power generation to financial services and insurance.
In 2004, CNOOC generated revenue of RMB 70.92 billion and net profit of RMB 24.22 billion, and RMB 12.09 billion in taxes in 2004, up 32%, 62% and 80% respectively from the previous year. By the end of 2004, total assets and nets assets had reached RMB 153.26 billion and 83.06 billion, a 28% and 21% increase from the beginning of the year. It is the fifth and 12th in gross profits and totals assets among state-owned enterprises in China. Standard & Poor's and Moody's Investors Service assigning CNOOC a long term BBB+ and A2, equivalent to China' sovereign rating and the highest ratings for Chinese companies.
Exploration and production of oil and gas saw a steady growth in 2004. The output reached 36.48 million tons of oil equivalent, increasing by 3.12 million ton or 9% as compared with 2003. Its domestic production reached 24.72 million ton, an increase of 11% from the previous year, higher than the average national growth rate of 3%. Annual output in Bohai Bay exceeded 10 million ton of oil equivalent for the first time, making it the second major offshore producing area with an output of over 10 million ton in China after Eastern South Sea and an important energy production base in northern China.
CNOOC has set up CNOOC Gas & Power focusing on the downstream development of gas distribution and gas power generation. CNOOC has become China's dominant producer of liquefied natural gas in the past few years. In an increasingly competitive domestic LNG market, CNOOC concluded all mid- and down-stream contracts in the Guangdong and Fujian LNG projects, to import 3.5 million ton per annum(mpta) and 2.6 million mpta LNG respectively from Australia's North Western Shelf project (NWS) and Indonesia's Tangguh field operated by BP. LNG projects in Zhejiang and Shanghai started construction, and CNOOC also signed head of agreements (HOAs) on LNG cooperation with Liaoning, Tianjin, Hebei, Hainan and Jiangsu, although these plans are not finalized. So far CNOOC has completed its preliminary strategic deployment in natural gas industry in the coastal areas south to the Yangtze River. In these projects, CNOOC is responsible for both the construction of LNG receiving terminals and trunklines for gas transmission as well as the construction of gas-fired power plants.
In April 2004, the Ministry of Commerce granted CNOOC-SINOPEC United International Trading a license to import crude oil. Previously, CNPC, Sinopec, Sinochem and Zhuhai Zhenrong had been the only companies which imported crude oil to China. In July, the NDRC approved the Nanhai Refinery Project with an annual capacity of 12 million ton, a joint venture between CNOOC and Royal Dutch Shell and the largest joint venture ever in China. CNOOC had established integrated industrial portfolio as it expanded into the refining business, and CNOOC was preparing itself for the retail and wholesale of refined oil, the business which used to be monopolized by CNPC and Sinopec. Shell went ahead with the JV ethylene plant ($4.3 bn), but in 2007 announced it would not take part in the refinery ($2.4 bn).
The three listed companies under CNOOC had remarkable performances in 2004. The share price of CNOOC Limited rose by 37%, and its market capitalization reached RMB 181.68 billion. The share price of CNOOC Engineering listed in the Shanghai Stock Exchange rose by 66.11%. The market capitalization of China Oilfield Services reached RMB 10.1 billion. At the end of 2004, market capitalization of the three listed companies had approached RMB 200 billion, 3.3 times as much as their net assets. The value of state-owned assets was effectively increased.
CNOOC makes continuing efforts in various areas including oil and gas exploration and development, exploitation of overseas resources, development of midstream and downstream business and establishment of modern business system in 2005, to build an integrated energy company with international competitiveness and modern management system by 2008 with fast and quality growth and strong profitability. It aims to develop into a world-class integrated international energy company.
Under ex-CEO Wei Liucheng, who was promoted to the governor of Hainan province in October 2003 as a reward for his outstanding work, and the incumbent chairman and chief executive Fu Chengyu (傅成玉), CNOOC took aggressive measures in merges and acquisitions relevant to core business in recent years, among which it acquired five blocks in Indonesia from Spanish oil company Repsol in 2002 and became the largest offshore operator. In 2003, it bought 5.3% of interests in NWS ensuring the supply of Guangdong LNG project, in the same year it exercised the preemption right to acquire 12.5% of interests in Tangguh to ensure the supply of Fujian LNG project. CNOOC also sought to acquire a 12.5% interests in Australia's Gorgon field to ensure the supply of Shanghai and Zhejiang LNG projects, however this fell through when the parties could not agree on a price.
According to SASAC in December 2008, CNOOC made a light oil and gas discovery in the 100 million tonne class at its Jinzhou 25-1 field in Bohai Bay. In May 2009, the company announced a plan to build a $4.38 billion coal-based natural gas project in Shanxi.
CNOOC is the first company to bring LNG (Liquefied Natural Gas) to China, with the completion of its Dapeng LNG Terminal in Guangdong. The terminal received its first LNG cargo in July 2006, from the NW Shelf LNG project in Australia. The following are planned/proposed LNG terminals by CNOOC:
|Name||Location||Start-up Date||Capacity (mmtpa)||CNOOC share|
Drug trafficking ties
In October 2004 firms were formed to negotiate contract sharing in Burma. The companies were "Myanmar Oil and Gas Enterprise", "China Huanqiu Contracting and Engineering corp", and CNOOC's Singapore joint venture partner "Golden Aaron". Golden Aaron is run by Cecilia Ng, wife of Steven Law (Tun Myint Naing), while Law is the son of Lo Hsing Han, known as the "Godfather of Heroin". In 2008 the US Treasury publicly implicated that CNOOC have been cooperating with a company run by a family notorious for heroin-trafficking.
Human right abuses in Burma
In 2007 CNOOC was involved in a clash with Burmese workers who threw stones at the company offices. Ten citizens from Kyaukphyu were detained and questioned by the government authorities after disputing with CNOOC over low wages and long working hours. There were complaints of underpayment as well as the mistreatment of inhabitants.
In 2008, CNOOC have also been accused of abuses of human rights in Burma. The campaign group Arakan Oil Watch stated in a report that "left behind such a trail of abuses and environmental contamination on Ramree Island that outraged locals attacked their facilities." The actions of CNOOC in Burma has been compared to that of communist party officials within rural China, where entrepreneurs who want to pursue a development against the locals just steamroll the opposition. Mainly the Shwe gas project has been linked with land confiscation and human right abuses.
Involvement in persecution against Falun Gong
CNOOC has been accused of participating in the persecution of Falun Gong by collaborating with the Chinese Communist Party to send CNOOC employees who practice the spiritual discipline to labour camps, brainwashing centres, decreasing their pay, and preventing them from receiving benefits or regular wages if they refuse to give up their beliefs.
2011 Bohai bay oil spill
On June 4, 2011, the Penglai 19-3 oilfield operated by ConocoPhillips caused an oil spill from a sea floor leak that lasted until June 7. This was followed by a second leak that occurred on June 17, but was contained within 48 hours. In total the leaks polluted more than 840 square kilometers of first grade clean water in Bohai Bay. The oil field is 51% owned by CNOOC, and 49% owned by the United States company ConocoPhillips. The leak however was not publicly reported until 31 days later on July 5, 2011.
2011 Huizhou refinery explosion
On July 11, 2011, an explosion blast occurred at the Huizhou refinery at the Daya Bay Economic and Technical Development zone in Guangdong province. The refinery is also only 40 kilometers from the Daya Bay Nuclear Power Plant.
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