Singapore, 15 June 2010

Wood Mackenzie’s comprehensive review of upstream corporate activities by China’s National Oil Companies (NOCs) indicates that intense activity over the last 12 months will result in net overseas production reaching a new record level of 1 million barrels of oil equivalent per day (boe/d) in 2010 from CNPC/PetroChina, Sinopec Group and CNOOC Ltd combined. Wood Mackenzie expects high levels of international business activity to persist but with an increasingly multi-dimensional and aggressive approach to asset acquisition combined with higher levels of partnership with national oil companies and international players.

Norman Valentine, Senior Analyst on Wood Mackenzie’s Corporate Analysis team says, “Wood Mackenzie’s analysis shows that the last 12 months has seen intense corporate activity by the Chinese NOCs and that a much more aggressive stance on M&A is being taken. In total the three Chinese NOCs have committed nearly US$25 billion to asset and corporate acquisitions since April 2009, far exceeding previous annual spending.

“Until recently Wood Mackenzie has characterised international expansion by the Asian NOCs as relatively conservative.  Acquisitions over the last twelve months have changed the picture - we estimate that the three Chinese NOCs alone accounted for nearly 20% of global deal value in the first quarter of 2010.”

Valentine explains that Wood Mackenzie anticipates this increased activity will continue, ”With large-scale deals of over US$9 billion committed so far in 2010, we expect the Chinese NOCs to maintain high levels of deal activity.  Domestic oil demand growth and concerns of over-reliance on Middle East imports are some of the drivers for Chinese NOCs to continue international portfolio expansion. With healthy cash-flow generation, strong balance sheets and implicit financial backing from the Chinese government, they remain well placed to continue overseas growth through asset purchases and corporate deals.”

Wood Mackenzie’s report, titled ‘Chinese NOCs Step Up International Expansion’, highlights the tangible impact of this increased business development and acquisition activity on the companies’ international reserve and production levels, “In the last year, we estimate that Chinese companies have accessed 2 billion barrels of oil equivalent (boe) commercial reserves, which translates to a 40% increase in our estimate of the companies’ existing international reserve base at the beginning of 2009.  As a result, we expect that the NOCs will produce over 1 million boe/d from overseas operations in 2010,” Valentine expands.

The report says that long-term corporate development aims are also an important objective for the Chinese companies and access to new segments such as unconventional resources and global LNG are being targeted. A multi-faceted approach that includes discovered resource opportunities with resource-holding national oil companies and partnerships with International Oil Companies (IOCs) are playing an increasingly important role.

Valentine explains, “We see partnerships with IOCs as a strategy for resource access and risk sharing. In addition, NOCs gain access to new technologies and operational techniques, particularly in the unconventional arena.  Partnerships offer a number of mutual benefits: it may make the expanding presence of Chinese NOCs more acceptable to host governments; the risks of international asset development can be shared; and market access to China can be leveraged.”

Wood Mackenzie concludes that while it may take some time for Chinese NOCs to be considered leading players in the industry’s emerging resource segments, Chinese NOCs are well positioned to maintain high levels of corporate activity in the future and build on the milestone production levels of 2010.

Ends --