Oil: China and Nigeria have just given western oil majors another reason to worry. Up until now, Chinese oil firms were hunting for oil in risky places where the majors didn’t already have a big presence or where they were keen to sell, including Iraq and Argentina. But now China is moving into Nigeria in a big way, according to the Financial Times. CNOOC, one of the three largest Chinese oil companies, is said to be bidding for 6 billion barrels of oil reserves.
This is a change of tack. Nigeria is different because Western oil firms — Shell, Total, Chevron and ExxonMobil — are already active in this risky country. The Chinese want to get into blocks already part-owned by these majors.
The terms of any deal letting Chinese in, or forcing the Western companies out, are unclear. Anything like a seizure looks unlikely, as the Nigerians need the Western expertise and would be a legal mess. But with relations between the oil majors and the government strained, Nigeria could be trying to use the Chinese to get better terms off the existing holders.
The rich Chinese are an increasing competitive threat to the Western companies. But this also has a silver lining. Shell looks increasingly fed up with the security situation in Nigeria and is already selling some acreage in the country. With a willing buyer, it may be keen to sell more. In Argentina, the Chinese appear to be the only bidders interested in the whole of YPF, controlled by Spain’s Repsol.
What’s more, pragmatic Western oil firms are finding that the Chinese can make good partners. BP and Shell, for example, teamed up with Chinese oil firms in the recent Iraqi oil auction. Most observers had expected Sinopec, CNOOC and CNPC to band together to outbid the westerners.
In reality, the oil majors want to deepen relations with China, and vice versa. China needs the technological expertise that only big majors can provide to exploit its unconventional oil reserves. The country is also set soon to become the world’s largest oil importer. Chinese oil and gas firms are clearly going to be big players in the industry. If you can’t beat ‘em, join ‘em.