In 2005, Fu Chengyu, then-CEO of the state-controlled Chinese oil company CNOOC, wrote an op-ed for the Wall Street Journal, titled, Why is America Worried? Fu (pictured above) intended to reassure Americans that he meant no harm with a bid at the time to buy Unocal, the California-based oil company. But it did no good: Americans were in fact worried about allowing what they regarded as a strategic resource to fall into the hands of a rival country. Instead Chevron, with a lower bid, ended up with Unocal.
Today, Fu, now CEO of another Chinese oil giant called Sinopec, is back in the United States. He has been buying up minority stakes in large unconventional oil fields -- shale gas and shale oil -- through deals with companies like Chesapeake Energy and Devon Energy. The Wall Street Journal says the state-by-state total investment since 2010 between Sinopec and CNOOC has been $17 billion.
So should America again be fearful? The answer is no. Specifically, if the U.S. were presented today with a similar situation in which Sinopec, CNOOC or another big Chinese enterprise bid on a U.S. oil company, it ought to eagerly embrace it.
The reason is that, unlike with IT or other high-tech intellectual property, it is in the United States' strategic interest for China to possess its companies' cutting-edge oilfield technology, specifically how to develop shale gas and shale oil. China will keenly seize on that technology and apply it back home, with the result that pressure will be reduced on global oil prices. On shale gas, because a big find of indigenous gas is one of the only ways in which China will switch out of far dirtier coal in the production of electricity, it would be a strategic achievement if China became a first-rate fracker.
I spoke this morning with an oilman having specific interest in the subject -- John Imle, Unocal's former president. Imle said that a Chinese acquisition of a U.S. energy company -- say, Chesapeake, the second-largest gas player in the country -- would be "all upside" for the U.S. He said:
It's part of globalization and not an unhealthy part. It's positive for humanity because it results in energy supplies that are adequate so we don't have energy wars down the road. And it should provide lower-cost energy globally, which is important for the global economy. So I don't see any downside. It's all up. We want the Chinese to have plenty of gas.
Iraq -- drilling in a (former) war zone: With the U.S. military role in Iraq officially over, so vanishes the main official outside protection afforded Big Oil, which is working there in droves. Iraq is the largest potential new oil bonanza on the planet -- it has the second-largest known reserves next to Saudi Arabia. For oilmen, this is a bracing new day: One can hire an army of former commandoes as security -- which the companies do -- but the presence of a friendly Western security force is a qualitatively different and assuring thing. Bombings are a regular occurrence; as the Wall Street Journal's Hassan Hafidh reports, BP temporarily stopped producing oil in part of southern Iraq's Rumaila field after someone bombed pipelines.
Yet business goes on: Big Oil's stomach for badlands rises in proportion with the potential output, and in the case of Iraq's three big southern fields -- West Qurna and Zubair (pictured above), in addition to Rumaila -- the companies have pledged to produce 6.8 million barrels a day. That is a massive goal, considering that the same companies -- BP, Italy's Eni and ExxonMobil -- plan to produce just one-sixth of that daily volume from fields of similar collective size on the Caspian Sea. The Iraqi government has a stake in ensuring the companies' relative safety as its ambitions are even greater -- it hopes to raise the country's production to 12 million barrels a day by 2017. Virtually everyone outside the country regards the higher aim as fantasy. One reason is that, quite apart from the security situation, Iraqi bureaucrats make it hard for the companies to operate, reports Bloomberg. "The red tape companies encounter in Iraq -- when they apply for employee visas, for example, or try to import equipment or seek payment -- seems to reflect attitudes rooted in the past," the agency writes.
Go to the Jump for more of the Wrap
Steve LeVine is the author of The Oil and the Glory and a longtime foreign correspondent.