What CNOOC (CEO) Nexen (NXY) Acquisition Means For Oil Sands (China oil companies production reserves offshore)

After months of waiting for the Canadian government to approve it, on December 8, 2012 China's national offshore oil corporation (nyse:ceo) completed a $15.1 billion all cash takeover of Canada's tenth largest oil company Nexen (tsx:nxy).  The deal is the largest foreign investment by any Chinese company ever and will undoubtedly be a confidence booster to Chinese firms looking to buy companies abroad after having been spurned by Unocal Corp in 2005 ($18.5 billion offer rejected) .  In order to get the Canadian government to approve the deal, CNOOC had to make a few concessions:  It agreed to an annual review of its operations, that Nexen Canadian operations employ more Canadian workers than Chinese, CNOOC has also said that it will consider listing on the Toronto Stock Exchange.  The stipulations are not new, the Canadian government has a similar arrangement with Rio Tinto Alcan.

Don't be fooled !  Chinese investment in Nexen doesn't necessarily indicate their interest in the oil sands.  Nexen only accounts for about 6% of oil sands production (including shale, Nexen produces 52 thousand bpd in Canada), in fact the majority of Nexen's production comes from outside of Canada in regions such as the North Sea, the Gulf of Mexico and offshore West Africa (African production down from 18th boe/d last quarter to nothing this quarter).