CASPER, Wyo. — A Chinese state-owned company has closed a $1.3 billion deal with a U.S.-based firm to cooperate in the oil and natural gas plays of the Niobrara Shale and Powder River Basin.
Oklahoma City-based Chesapeake Energy Corp. and the Chinese National Offshore Oil Corp., or CNOOC, closed the deal Wednesday.
The deal gains CNOOC a one-third interest in Chesapeake's leases covering 800,000 acres in the Denver-Julesberg Basin — which includes the Niobrara Shale — and the Powder River Basin. Chesapeake is one of the big players in the unfolding play in eastern Wyoming, which some say has the potential to unlock large amounts of oil using new drilling technologies.
As part of the deal, CNOOC agreed to fund two-thirds of Chesapeake's drilling and other costs up to $697 million.
“We look forward to accelerating the development of this large domestic oil and natural gas resource, resulting in a reduction of our country's oil imports over time, the creation of thousands of high-paying jobs in the U.S. and the payment of very significant local, state and federal taxes,” said Aubrey K. McClendon, Chesapeake's chief executive, in a statement.
The deal is the second between Chesapeake and CNOOC.
The two companies closed a similar deal worth $2.2 billion in November for Chesapeake's interests in the Eagle Ford Shale play in Texas.
Th two deals are just a few of several cooperative agreements inked recently by Chinese state-owned firms for interests in shale projects around the globe.
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Encana Corp. of Canada announced plans Feb. 9 to sell half of a British Columbia shale gas project to PetroChina, an arm of China National Petroleum Corp., for $5.4 billion. The Canadian government has said it intends to review the deal.
On Thursday, CNOOC won initial approval by the Australian government to invest in a coal seam gas and shale gas exploration in Queensland through a $50 million deal with Exoma Energy.
Analysts at investment bank UBS and other firms say the Chinese firms are deepening their involvement in North American shale plays to gain experience and technical expertise for use in similar formations within China.
China is heavily dependent on imported oil and gas and is seeking to exploit its own resources. The state-run Strategic Research Center for Oil and Gas set a goal to locate 35 trillion cubic feet of shale gas reserves in China and produce 8 to 12 percent of the country's natural gas from shale formations by 2020.
CNOOC will spend $53 billion over five years on oil and gas exploration in China, according to a Chinese state television report quoted by Reuters.
China's move into North American shale plays is driven by commercial interests, not political reasons, according to a recent report released Thursday by analysts at the International Energy Agency.
“These are far from puppet companies operating under control of the Chinese government, as many have assumed,” said Julie Jiang, who co-wrote the report. “Their investments in recent years have been driven by a strong commercial interest, not the whim of the state.”