China’s once acquisitive oil giant seeks to revive global dealmaking By Reuters

By Chen Aizhu

SINGAPORE (Reuters) – Asia’s biggest oil producer CNPC is overhauling its global strategy as it looks to revive deal-making, pursue gas liquefaction and deep-sea drilling as well as build on its record of producing more much of obsolete wells, the head of its research division. said.

China National Petroleum Corp (CNPC) and its publicly traded subsidiary PetroChina are grappling with stagnant domestic oil production and a shortage of new projects globally to boost reserves, even as slowing economic growth and the rise of electric vehicle use is eroding domestic demand, although rising geopolitical barriers limit its room for maneuver. .

CNPC could rekindle investment in large oil and gas assets as an operator, as it did two decades ago with its $4 billion acquisition of Canada’s PetroKazakhstan and takeover Devon Energy (NYSE: ) of Indonesia, said Lu Ruquan, who is director of CNPC’s Economic and Technological Research Institute (ETRI) and is involved in strategy discussions.

The shift in strategy for Asia’s biggest oil producer would be a return to the more acquisitive 1990s and 2000s, when it moved into Sudan and Chad and struck deals with Kazakhstan and Indonesia.

Lu likened the company’s three decades of overseas investment to “a ship sailing mid-stream” as he described the need for CNPC to engage in more global acquisitions.

“You have to row harder or it will pull back,” said Lu, the former head of strategy and development at CNPC International Group’s procurement arm before moving to ETRI, offering a rare glimpse into the strategic thinking of a of most in China. powerful state enterprises.

CNPC has the power to impact the landscape of oil and gas transactions, with PetroChina alone holding $37.5 billion in cash equivalents in 2023.

CNPC may seek to expand its liquefied natural gas (LNG) investments in Qatar, Lu said, following last year’s deal to tie up a small stake in QatarEnergy’s massive gas liquefaction plants with an offtake agreement on several years.

CNPC will also look for opportunities in South America’s deep-sea acreage adjacent to fields in Guyana, where China’s CNOOC (NYSE: ) Ltd, part of a consortium led by Exxon Mobil, has made massive new discoveries, it said he.

PetroChina produces more than ExxonMobil (NYSE: ), but its share of output from global operations fell to 11 percent last year, according to company data, from a peak of nearly 14 percent in 2019. Chinese companies have limited global purchases since the 2014 oil price crash /15.

Lu warned that given the constraints of sanctions in key hydrocarbon-rich targets such as Venezuela, Iran and Russia, more practical options include extending existing contracts such as those in Kazakhstan and Indonesia, which are nearing expiration.

“PetroChina’s biggest strength is to extract more oil from aging fields,” he said, a capability developed over decades in the vast and still productive Daqing field in northeast China.

Analysts at Wood Mackenzie are predicting a revival in international acquisitions by national oil companies (NOCs) after last year’s two-decade low, as the industry refocuses on oil and gas amid slowing energy transition activity.

“Developing international business remains a major priority for China’s largest CONs, but they have taken a cautious approach to deal-making in recent years,” Woodmac said.

CNPC may face its biggest geopolitical hurdles since it first ventured overseas in 1993, Lu said.

Chinese companies have refrained from new investment in Russia as other global firms have pulled out in the wake of Russia’s war with Ukraine, although China is one of Russia’s biggest oil customers and a fast-growing buyer of natural gas.

Strained relations with the United States have hampered opportunities there, where $250 billion in deals were completed during last year’s industry consolidation.

CNPC and PetroChina do not own US producing assets, and PetroChina was delisted from the New York Stock Exchange in 2022 due to audit scrutiny.

Lu also warned of its alliances that combine CNPC’s construction and engineering expertise with the commercial and legal acumen of oil majors, such as in Kazakhstan’s Kashagan with Chevron (NYSE: ), have limits as a business model.

“It is a challenge to protect your interest and access sufficient operational information as a small investor. We would need strong commercial and legal skills, which happen to be our weak links,” he said.