SINGAPORE (Reuters) – China National Petroleum Corporation (CNPC), the leading oil producer in Asia, is reassessing its global strategy to revive its presence in international dealmaking. The company is considering investments in gas liquefaction and deep-sea drilling, alongside efforts to maximize output from aging oil wells, according to the head of its research division.
Facing challenges such as stagnant domestic oil production, a limited number of new global projects, and declining demand due to economic slowdown and the rise of electric vehicles, CNPC and its subsidiary PetroChina are under pressure to seek growth opportunities abroad. However, geopolitical tensions are complicating their ability to navigate these challenges.
Lu Ruquan, director of CNPC’s Economics and Technology Research Institute, indicated that the company might revisit its strategy of acquiring substantial oil and gas assets, echoing its past moves like the $4 billion acquisition of PetroKazakhstan and the purchase of Devon Energy’s operations in Indonesia. This potential shift would mark a return to CNPC’s more aggressive global expansion during the 1990s and 2000s.
Lu described CNPC’s three decades of overseas investments as akin to “a vessel sailing to midstream,” emphasizing the need for renewed global acquisitions to maintain momentum. Without further efforts, Lu suggested, the company risks falling behind.
With $37.5 billion in cash equivalents held by PetroChina alone in 2023, CNPC has the financial capacity to make significant moves in the global oil and gas sector. The company may look to build on its recent investments in Qatar’s liquefied natural gas (LNG) sector, as well as explore opportunities in South America’s deep-sea regions, particularly near fields in Guyana where China’s CNOOC has made significant discoveries.
Despite PetroChina producing more than Exxon Mobil, its share of global output has decreased to 11% in 2023, down from nearly 14% in 2019. Chinese oil companies scaled back on international acquisitions following the oil price collapse of 2014/15, but there are signs of a potential revival in activity.
However, Lu warned of the difficulties posed by sanctions on resource-rich nations like Venezuela, Iran, and Russia. In light of these constraints, CNPC might focus on extending existing contracts, particularly in Kazakhstan and Indonesia, where deals are nearing expiration.
CNPC’s expertise in extracting more oil from aging fields, a skill honed at the Daqing oil field in northeast China, remains a significant strength. Analysts at Wood Mackenzie foresee a resurgence in international acquisitions by national oil companies, including China’s NOCs, as the industry shifts focus back to oil and gas amidst a slowdown in energy transition efforts.
Yet, CNPC faces substantial geopolitical challenges, including strained relations with the United States, which have limited opportunities in a market that saw $250 billion in deals last year. Additionally, CNPC and PetroChina do not own any producing assets in the U.S., and PetroChina delisted from the New York Stock Exchange in 2022 due to auditing scrutiny.
Lu also highlighted the limitations of partnerships that combine CNPC’s construction and engineering capabilities with the commercial and legal strengths of oil majors, citing the Kashagan project in Kazakhstan with Chevron as an example. He noted that safeguarding interests and accessing sufficient operational information can be challenging as a smaller investor without strong commercial and legal expertise.
