U.S. Companies Invest in Chinese Shale Gas

Brian Hicks

Written By Brian Hicks

Posted July 18, 2012

Although China hasn’t developed its shale oil and gas prospects nearly enough, U.S. oil service companies are rushing to negotiate deals with local partners prior to China’s second round of bidding later this year.

Back in June of 2011, first-round allocations of shale-gas blocks went to Chinese state-owned concerns.

The Wall Street Journal reports:

“There’s money to be made here,” said Simon Powell, head Asian-Pacific oil and gas analyst at broker CLSA. “It’s like the gold rush—it’s the guys who sold the picks and shovels who made the money, not the miners themselves.”

U.S. oil company Schlumberger Ltd. (NYSE: SLB) paid $80 million last week for a 20.1 percent stake in Anton Oilfield Services Group (HKG: 3337). That deal made Schlumberger the second-biggest shareholder of Anton and gave it access to big customers like China National Petroleum Corp. and China Petrochemical Corp.

But major Chinese energy companies are looking instead to North American shale assets. Companies like CNPC, Sinopec Group, and China National Offshore Oil Corp. have already made investments.

It appears that these buy-ups are mostly in an effort to gain higher returns despite speculation that it is to gain knowledge of the processes used there, says the Wall Street Journal.

Actual intellectual and technical expertise remains in favor of various non-Chinese oil services firms like Schlumberger, Halliburton Co. (NYSE: HAL), and Baker Hughes Inc. (NYSE: BHI), and they aren’t parting with them quickly.

Schlumberger’s investment in Anton may have been a strategy to safeguard its intellectual property. In joint ventures, it is often easier for a foreign companies to gain knowledge of the other’s technical expertise. But Schlumberger’s minority stake protects that.

More U.S. competitors such as Halliburton and others are likely to move into the Chinese market.

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