CNOOC's Nexen Deal: A Sign of Things to Come?

CNOOC's planned $15 billion takeover of Canadian oil producer Nexen shows the Chinese Communist government will not stand in the way of state enterprises' ambitions, paving the way for similar deals in future, experts told CNBC on Tuesday.

Oil Rig
Oil Rig

The bidshows that China isn’t letting politics get in the way of mergers and acquisitions, Rob Cox, editor of Breaking Views told CNBC.

“The upcoming 18th party congress of China’s Communist Party, which is expected to convene in the fall to select new leadership, is supposed to hold back the global ambitions of state enterprises, at least temporarily. But CNOOC’s $15.1 billion bid for Canada’s Nexen suggests that’s not happening,” he said. “Any deal in the energy sector that is giving Chinese companies more assets around the globe in resources, seems to be ok.”

The Chinese state-run oil giant's recently-announced deal is a very significant transaction, Thomas Hilboldt, Head of Oil, Gas & Petrochemicals Researchat HSBC Asia Pacific said, but the company's strategy is similar to that of other Chinese oil companies who are all exploring other continents to diversify their resource base and their production.

The Nexen takeover is China’s latest effort to amass natural resources required to continue to stoke its powerful engine of growth. “Chinese oil makers have been very active in their international strategies, (…) the takeover isn’t an exemption to their strategy in the last decade or so,” Hilboldt said.

Although the purchase seems expensive, Hilboldt said the price was not too high because CNOOC was getting "some very significant upfront production”, which includes assets in north America, Canada Sands, the Gulf of Mexico, Nigeria, the Middle East, and the North Sea, where production is highly valued at the moment.

Although it is smaller than the company’s eventually withdrawn bid for U.S. oil group Unocal a few years ago, the deal will be the largest ever full-blown foreign takeover by a Chinese company if it’s approved, Cox said.