Cnooc alters U.S. oil leases


Cnooc alters U.S. oil leases

WASHINGTON -- U.S. oil drilling leases acquired by a Chinese state-owned oil company as part of its $15 billion buyout of Canada's Nexen are being altered as a condition of U.S. approval, people familiar with the issue said.

The U.S. formally approved the deal in February, helping to clear the way for Cnooc earlier this week to complete China's largest foreign purchase. U.S. officials scrutinized the deal because Nexen, a Calgary-based oil and natural gas company, owned more than 200 drilling leases in the Gulf of Mexico, a primary source of U.S. oil.

The deal underwent a review by the Committee on Foreign Investment in the United States, known as CFIUS. The purpose of the committee is to analyze potential security threats resulting from foreign purchases of U.S. businesses. The committee doesn't release its findings to the public.

One person familiar with the deal said the control structure of the leases is being changed, although Cnooc could retain ownership of the economic value of the contracts.

Asked earlier this week if the CFIUS process required Cnooc to divest any assets in the Gulf of Mexico, Nexen Chief Executive Kevin Reinhart said, "We're not going to get into any of that, because we can't get into the elements of the deal for confidentiality reasons."

He said it "took a while to inform the U.S. government of how the business operates." He added that the sides found common ground "where the U.S. could achieve their objectives and where Cnooc and Nexen were comfortable that we had a very vibrant and viable business model that allows Cnooc and Nexen to continue to extract all the value that we see in the Gulf of Mexico."

Mr. Reinhart continues to lead Nexen under Cnooc's ownership.

The U.S. signoff marked an important milestone for Cnooc, which attempted to invest in the U.S. energy industry in the middle of the last decade, bidding for Unocal Corp. That deal died amid political opposition in the U.S., and Chevron Corp. bought Unocal.

Foreign companies can drill for oil in U.S. waters as long as they have a U.S. subsidiary. The name of Nexen's U.S. subsidiary is Nexen Petroleum Offshore USA Inc., according to government documents.

Nexen and Cnooc voluntarily submitted their deal to CFIUS for review.

Dow Jones Newswires


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