CNOOC sees Nexen deal closed in first quarter at earliest

BEIJING Fri Dec 28, 2012 12:06am EST

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BEIJING (Reuters) - China's CNOOC Ltd (0883.HK) said on Friday it expects its $15.1 billion takeover of Canadian oil and gas producer Nexen Inc NXY.TO to close in the first quarter of 2013 at the earliest, a move that could be aimed at giving U.S. regulators more time to approve a sensitive aspect of the deal.

The company is still awaiting U.S. approval over its purchase of Nexen assets in the Gulf of Mexico after Canadian officials approved the deal earlier this month.

A ruling by the Committee on Foreign Investment in the United States, or CFIUS, is seen the main remaining regulatory hurdle for CNOOC and Nexen, which resubmitted applications to the committee in late November.

"The closing date of the deal is closely linked with the approval result. Now it looks like it is not practical to close by end of the year. So now we expect it to be closed at the earliest in the first quarter of next year," said a CNOOC official with the firm's investment relations office.

The official declined to comment on the status of CFIUS approval.

U.S. companies face barriers to invest in around 100 Chinese sectors, restricting their opportunities in the world's second-largest economy. Chinese firms wanting to invest in the U.S. fear a political backlash in Congress and being blocked on national security grounds by CFIUS.

One issue the committee will examine is whether Nexen's assets are too close to sensitive U.S. military areas, CFIUS experts have said.

Though just a fraction of Nexen's reserve base and production, an acquisition of the Canadian firm's Gulf of Mexico assets would give CNOOC a foothold in the world's prized deepwater oil province.

Industry officials are optimistic about winning U.S. approval, arguing that the Gulf of Mexico assets are relatively small, but carry huge exploration risks and require massive spending.

"I don't foresee many political hurdles from the U.S....CNOOC, which already holds U.S. onshore assets with Chesapeake, will just be one of hundreds of firms already working in the area," said one Beijing-based official with direct knowledge of CNOOC's overseas investment.

Judging from the wells already sunk by Nexen in the region, the exploration and development risks could outweigh the economic returns, said the official.

(Reporting by Chen Aizhu; Editing by Jonathan Standing and Matt Driskill)

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Comments (1)
MikeBarnett wrote:
My partners and I have interests in CNOOC that would benefit from the acquisition, and we have other assets in Canada. We will gain in both directions. However, the US will gain if CNOOC gains additional deep water drilling expertise. During the Deep Water Horizon crisis in 2010, CNOOC had rigs in the Gulf of Mexico and could have been a source of technical assistance. That may improve in the future.

Oil is fungible, so any increase in supply helps lower fuel prices in the US. Modern economies produce goods in one city and sell them in many cities, requiring transportation that needs fuel. Reducing fuel costs saves businesses money, so they can hire more workers. Consumers save money on fuel to invest or spend more and drive the US economy. All three countries can benefit from this acquisition.

Dec 28, 2012 3:54pm EST  --  Report as abuse
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