China National Offshore Oil Corporation (CNOOC) company internationalization essay
Economic success of China and its growing economic and political influence disturb many neighbors and competitors. China’s search of oil and gas resources around the world is one of the most controversial topics for geopolitical speculation. Politics of “exit abroad” in China officially existed since 2001. In the oil and gas sector, one of its leaders is China National Offshore Oil Corporation, as well as two more national oil companies CNPC and Sinopec.
Tactics of the strategy consists of four main areas: purchase of assets and companies, alliances, transaction of “resources for the market” type and “loans for oil.” From 2002 to 2013, Chinese NOCs completed more than 50 mergers and acquisitions in 20 countries. Currently, Chinese oil companies operate in more than 30 countries, including 20 where they take part in the production.
Basic information about CNOOC
China National Offshore Oil Corporation (CNOOC) is the third largest national oil company of China after CNPC and Sinopec. It is engaged in production, processing and marketing of crude oil and natural gas in offshore China. It is engaged in development of offshore oil and gas resources on the basis of international cooperation and it is China’s largest offshore oil and gas producer. It was founded in 1982 and employs consists of 57,000 people. It is a public company, as 70% of shares are owned by the Government of the PRC. CNOOC securities are also traded on the stock exchanges of Hong Kong and New York.
History
CNOOC was formed in February 1982 as a result of the publication of Decree on January 30 by the State Council on cooperation with foreign enterprises in the development of offshore oil fields.
Deputy Minister of oil industry Venkay Keane was appointed the first president of CNOOC. As a part of a national corporation, there were established in May 1982 in Tanggu – Bohai Oil Corporation, in June in Guangzhou – Nanhai East Oil Corporation, in Zhanjiang – Nanhai West Oil Corporation, in July in Shanghai – Nanhuanghai Oil Corporation. Since 1999, CNOOC has changed its strategic priorities, conducted a large-scale reorganization and listing of its assets carried on two stock exchanges. By 2003, the company’s total assets exceeded 100 billion Yuan (Boisot & Meyer 2008).
Activities
China National Offshore Oil Corporation is integrated energy company engaged primarily in oil and gas development, energy production based on oil and gas, refining, chemical fertilizer production, oilfield services and provision of other specialized technical services, financial services and new energy. At the moment, the corporation has a monopoly in the field of offshore oil and natural gas, as well as their processing.
It owns 44 oil and gas fields in China, located in the Bohai Sea, the South China and East China seas. In 2008, its operating income was about 194.8 billion Yuan, total profit – about 67.8 billion Yuan, the total assets of the corporation amounted 409.5 billion Yuan (Tong 2009). Annual oil and gas production amounted 42.93 million tonnes of oil equivalent. The corporation in 2011 took 162nd position in the ranking of 500 largest companies in the world, compiled by the magazine “Fortune Global 500” (although in 2010 it took 252nd place) (Ling 2013).
CNOOC has plans to expand its global presence to become one of the major energy companies in the world. In particular, in March 2010 it was announced the acquisition of 50% of the Argentine oil and gas producer Bridas Corporation for approximately $3.1 billion. In addition, CNOOC owns energy assets in Australia, Indonesia, Kenya, Nigeria and Equatorial Guinea.
China National Offshore Oil Corporation internationalization
CNOOC is of great interest of many countries. “Aggressive” purchase of corporation «Unocal» (USA) and mutually beneficial cooperation with the Argentine company «Bridas» hit the road to the resources of America. After 6 years, during which CNOOC rapidly followed the path of internationalization, the idea of overseas expansion was changing.
In March 2013, the member of the CPPCC, chief geologist of the China National Offshore Oil Corporation, Mr. Zhu Ke in the interview to “The first financial and economic newspaper” said: “China should be fully prepared to the high oil prices, there is no need to predict the course of industrial development after the price increase of oil. National Oil Company and other companies in China, entering the path of internationalization, can still make a big step forward” (Moreira 2013).
Internationalization of CNOOC from 1993 to 2004
Internationalization of China National Offshore Oil Corporation has begun some time ago. In 1993, they approved the development of overseas regions and created appropriate department. And before that, in 1992, CNOOC had a strategy for the development and detailed study of foreign areas rich in oil and gas (Schuler-Zhou, 2009).
After 3.5 years, it adopted the cooperation with foreign oil companies registered abroad, under administration of China and selling in Singapore. The first successful acquisition of CNOOC was the purchase of shares on the oil field in Malacca.
In October 1993, an international company «Atlantic Richfield» ceded shares of Malacca field to China National Offshore Oil Corporation and provided all related materials. In May 1994, CNOOC with the international company «Atlantic Richfield» has entered into an agreement to purchase 32.58% of shares of the deposit in the amount of 16 million US dollars. In 1995, CNOOC purchased from a Japanese Oil Company 6.93% of shares of the field in the amount of 2.95 million US dollars. These two purchases allowed China National Offshore Oil Corporation to become the largest holder of this oil field (Boisot & Meyer 2008).
In 1997, CNOOC with an international company «Atlantic Richfield» and the company «Environment, health and safety» signed an agreement on differentiated purchase of 5.9% stake in M7/M9 fields in Myanmar, 26.67% stake in four districts in the Gulf of Mexico and 20% of one more field there.
Development of China National Offshore Oil Corporation was due to foreign cooperation to create transnational cooperation. In the beginning, the company was aimed at training and learning environment.
However, in the initial period of the internationalization, the company missed some opportunities due to external influences. China National Offshore Oil Corporation reached an agreement with one oil company in Spain, Asian financial crisis stopped the process. The country worried about losing money and suspended the project.
After China’s accession to the WTO in 2001, the strategy of expanding outside the country has been framed as a political task, named “exit abroad.” It was announced that foreign investment became a major focus of the five-year development plan for 2001-2005 (West 2005).
CNOOC conquest of the world market (2005 -2010)
Although the first steps towards internationalization were made relatively early, but biggest success was mainly achieved in recent years. In 2005, China National Offshore Oil Corporation was going to buy the corporation «Unocal». Although it failed on the verge of success, that was regarded as a landmark event.
This aggressive style of expansion surprised the world, but the loss taught general director of CNOOC Fu Chehnjuj a very useful lesson. “Buying corporation «Unocal» showed the determination and courage of the Chinese company, demonstrated its confidence in the future. However, looking back, I see that difficulties in purchasing were underestimated, “- says Zhu Ke. “Playing on the enemy’s and own field are two different concepts” (Hong & Sun 2006).
In 2005, as a part of the strategy of “absorption”, CNOOC together with Sinopec got involved into the development of Canadian sandstones by purchasing assets of MEG Energy and Northern Light. Later, during 2009 and 2010, the purchase of assets in oil sands continued.
In 2007, China National Offshore Oil Corporation explored 10 new oil and gas fields in the Bohai Bay and the Gulf of Beibu. According to the statistical bulletin on the state of the marine sector in China, in 2007 the value added products industry operating offshore oil and gas resources reached 76.9 billion Yuan, having increased by 17.3 percent compared with 2006 (Haldis 2008).
China National Offshore Oil Corporation (CNOOC) company internationalization essay part 2
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