For Cnooc, Nexen comes with Japanese joint venture
A successful bid for Nexen entails joint venture with Inpex Corp.
The economic fallout from a territorial dispute in the East China Sea is unlikely to register on a British Columbia shale gas frontier where Japan and China could soon be partners, a China expert says.
The debate over Cnooc Ltd.’s proposed $15.1-billion bid for Calgary-based Nexen Inc. is unfolding against an escalating war of words between Beijing and Tokyo over ownership of the Senkaku islands.
Regulators in Canada and the United States are currently reviewing the proposed takeover. In addition to giving Cnooc a bigger slice of the oil sands and deepwater assets in the Gulf of Mexico, the deal, if approved, would make China – via a joint venture Nexen closed last August with Inpex Corp. – a partner with Japan on several shale gas properties in northeastern British Columbia.
While the territorial dispute has strained the $340 billion Japan-China trade relationship – Toyota Motor Corp. and Nissan Motor Co. have each cut production in China, Bloomberg Businessweek reports – it is unlikely to curtail a joint venture between Inpex and a Cnooc-owned Nexen, says Gordon Houlden, a former Canadian diplomat who now heads the University of Alberta’s China Institute.
“It will be something they’ll have to work around because there is some bad feeling between business people on both sides,” he said in an interview. “But I wouldn’t expect to see this arrangement impeded in any direct fashion. I would be very surprised if that were the case.”
Inpex last year agreed to pay $821 million plus carry an additional $106 million in capital forward in exchange for a 40 per cent interest in assets owned by Nexen in the Cordova, Horn River and Liard basins (see map; via Inpex).
An 18-well pad is expected to start producing from the Horn River property in the fourth-quarter of this year, Nexen said in a statement last August confirming the deal had closed. That would more than double production capacity in the fairway to roughly 175 million cubic feet per day, up from 50 million cubic feet per day currently, the company said.
Through subsidiary Inpex Gas British Columbia Ltd., Inpex is targeting combined production from the Horn River and Cordova properties of 1.2 billion cubic feet per day, according to a description of the project posted to its web site. A call to a Calgary number listed on the company’s web site was not immediately returned.
The deal with Nexen marks Japan’s first attempt at developing shale gas. The joint venture, like most others in the region, includes a plan to study the feasibility of liquefied natural gas exports coveted by both China and Japan.