Today's Trends: Chinese Companies Shift M&A to Latin America O&G Assets

London-based analysis firm Evaluate Energy reported seeing in 2010 a marked shift in Chinese merger and acquisition (M&A) activity for oil and gas resources (O&G) away from Africa and towards the Americas, with spending in Latin America a key driver of deal value during the fourth quarter of 2010. Chinese state companies ended the year with $31 billion in E&P acquisitions, up from $19 billion spent by Chinese companies on E&P assets in 2009, with a flurry of deals during the fourth quarter of 2010 following an inactive third quarter.

Sinopec's acquisition of a 40 percent stake in Repsol Brazil for $7.1 billion was the largest deal of the fourth quarter, and gave Sinopec a foothold in the increasingly popular Brazilian offshore pre-salt reserves. During the quarter, CNOOC farmed into a 33 percent stake in Chesapeake Energy's liquids rich Eagle Ford shale assets, marking the first major Chinese acquisition in the U.S. since CNOOC's failed attempt to acquire Unocal in 2005.

To secure energy supplies for China's booming economy, the government also has entered into various loans for oil agreements, strategy that capitalized on the disparity of economic performance between China and the majority of the reset of the world, without the risk of potential hostility from another Chinese asset grab. Agreements are now in place with Brazil, Russia, Kazakhstan, Ecuador and Venezuela, with the latter receiving a $20 billion loan.


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