Analysts have speculated that the control over a key oil market measure – the Brent crude index – could have influenced Chinese firm CNOOC’s interest in the North Sea.
CNOOC’s £9.6billion purchase of Nexen would give the firm – through its control of the Buzzard facility, with capacity of 210,000 barrels of oil equivalent per day – a large share of the oil that makes up the Brent crude price.
However, Janet Xuanli Liao, lecturer in international relations and energy security at Dundee University, does not think this is the driving force behind the firm’s acquisition.
“If you look at Chinese companies’ strategies, Brent is not that important,” she said.
What is more important is securing supply. About 53% of Chinese oil demand is imported, she said – a figure increasing at a rate of 1-2% per year. Gas imports are also about half of Chinese demand. This would have also driven Sinopec, which offered £956million for 49% of Canadian-listed Talisman’s UK North Sea business, including 11 platforms, the same day as CNOOC made its Nexen bid.
There has been speculation China could have massive shale gas resources, leading to a huge boost in production similar if not bigger to that seen in North America. However, the level of China’s shale reserves and how fast it could commercially produce them is yet to be seen.
It is unlikely all the oil produced under CNOOC, through Nexen – if the deal goes through – would be shipped to China. Instead it could be traded. This could ultimately be beneficial for the global market, suggested Ms Liao – unless Chinese demand does carry on continuing to soar.
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