China’s Investment in North American Oil & Gas

By Jamie Ferguson, VP of U.S. Business Development, Maxwell Drummond

According to the International Monetary Fund (IMF), over the next five years, Asian economies will account for about 50% of the worlds growth. The world’s most populated country, China is the world’s second largest consumer of oil and it’s demand for a stable energy supply has made it a serious player in global oil markets. As pipeline and liquefied natural gas (LNG) infrastructure has developed, consumption of natural gas has also increased.

Chinese investment in North America’s oil and gas industry is expected to hit an all time high in 2012, beating the $5.7 billion record set in 2010. Since 2010, Chinese companies have invested more than $17 billion into the US and Canada’s oil and gas industries. The energy hungry nation’s latest push in North American energy is part a wave of investment money from Chinese state-owned companies and private enterprises into the U.S. and other Western nations. This report comes off the announcement of the Chinese oil giant, Chinese National Offshore Oil Company (CNOOC)’s intent to buy one of Canada’s largest energy companies, Nexen.

This type of investment in North American operators is just the beginning. There has been a rise in joint ventures where Chinese firms pay upfront for a stake of an oil or gas field and cover drilling costs. These investments give these firms exposure to technology, management techniques and skills they desperately need in China.

The recent spate of investments from China into North America can bring mutual benefits. North American operators require the Chinese investment to bring projects on stream, while Chinese companies require North America’s technology and expertise to begin developing the vast unconventional resources beneath China’s surface. The increase in investment gives Chinese companies access to the talent that drives North America’s unconventionals success, closing the knowledge gap that exists between the two regions’ industries. The US’s unconventionals expertise will become increasingly important in the next decade as China prepares to exploit its estimated 1,275 trillion cubic feet of gas.

Skills shortages are an ongoing issue in China. According to a recent survey of employers across Asia, almost all (95 per cent) believe that skills shortages have the potential to hamper the effective operation of their business or department. Leading companies and operators in China have a number of new projects coming up which is fuelling strong demand for oil and gas professionals across the board. This will lead to an increase in salaries locally, particularly for candidates who can demonstrate capacity and logical thinking, good communication skills in Mandarin and English and leadership skills. Additionally, there may be opportunities for Chinese workers to visit American acquisitions.

China alone will account for approximately 30% of the world’s economic growth over the next five years so it is widely acknowledged that the Nexen deal is one of many expected in the future.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 and by July 2011 was promoted to Vice President of U.S. Business Development. Jamie has extensive experience managing executive level searches for clients spanning the oil and gas value chain and has deep industry networks developed from working on assignments in over 20 countries on 6 continents.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.