WSJ: Big oil mergers ahead for China?

China is thinking of consolidating its national oil companies in order to improve efficiency amid low oil prices, and challenge global oil majors such as Exxon Mobil.

According to The Wall Street Journal, the government of the most populous country is looking to make two oil behemoths by merging four large national oil companies. The newspaper asserts that the way the companies are set up now, they are competing with each other.

The mergers would see China National Petroleum Corp (CNPC) joining forces with China Petrochemical Corp (Sinopec), and separately, China National Offshore Oil Corporation (CNOOC) would team up with Sinochem, WSJ has reported, citing people close to the matter.

In its recent results its 2015 Business Strategy and Development Plan announced this month, CNOOC did not mention any of these merger plans, but it did acknowledge that in response to challenges from falling oil prices, the company would aim to “control our costs and strive for the effective implementation of our capital expenditure plan in order to improve the overall performance of the company.” CNOOC has said its 2015 capital expenditure budget for 2015 will be lower by 26-35% when compared to 2014.

Wood Mackenzie, an energy intelligence company, has recently said that in 2015 low oil prices would spur large-scale corporate consolidation. The group has said that big mergers are more likely to happen this year than at any point since the late-1990s.

Year of Mergers & Acquisitions

Last quarter of 2014 saw two big M&A deals, one between oil companies, another in the oilfield services area.

Namely, Spanish oil company Repsol in November entered into an agreement to buy Canada’s Talisman Energy Inc. for $8.3 billion. Subject to regulatory approvals the takeover is expected to be completed in the second quarter of 2015.

Separately, Halliburton, world’s largest oilfield services provider, also in November, reached a deal to acquire its smaller rival Baker Hughes in a transaction valued at around $35 billion in cash and stock.

Offshore Energy Today Staff

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