Chinese Oil Giant Looks to Revive Global Dealmaking

CNPC, Asia's top oil producer, is reviewing its global strategy as it looks to revive dealmaking, eyeing gas liquefaction and deepsea drilling as well as building on its record of producing more from aging wells, the head of its research arm said.
China National Petroleum Corp (CNPC) and its listed arm PetroChina face stagnant oil output at home and a scarcity of new projects globally to boost reserves even as slowing economic growth and surging EV usage erode domestic demand, although mounting geopolitical barriers limit its room to maneuver, Reuters reported.
CNPC may rekindle investing in large oil and gas assets as an operator, as it did two decades ago with its $4 billion purchase of Canada's PetroKazakhstan and its takeover of Devon Energy's operations in Indonesia, said Lu Ruquan, who is director of CNPC's Economics and Technology Research Institute (ETRI) and is involved in strategy discussions.
The shift in strategy for Asia's biggest oil producer would be a return to the more acquisitive 1990s and 2000s when it moved into Sudan and Chad and carried out the Kazakh and Indonesian deals.
Lu likened the company's three decades of overseas investment to "a vessel sailing to midstream,” as he described the need for CNPC to embark on more global acquisitions.
"One needs to paddle harder, or else it will retreat backward," said Lu, the former head of strategy and development at the group's acquisition arm CNPC International before moving to ETRI, offering a rare glimpse into the strategic thinking of one of China's most powerful state enterprises.
CNPC has the firepower to make an impact on the oil and gas deals landscape, with PetroChina alone holding $37.5 billion in cash equivalents in 2023.
CNPC may try to expand on its liquefied natural gas (LNG) investments in Qatar, Lu said, following on from last year's deal that chains a small stake in QatarEnergy's massive gas liquefaction plants with a multi-year offtake agreement.
CNPC will also scout for opportunities in South American deep sea acreage adjacent to fields in Guyana where China's CNOOC Ltd, part of an Exxon Mobil-led consortium, struck massive new discoveries, he said.
PetroChina produces more than Exxon Mobil but its share of output from global operations shrank to 11% last year, according to company data, from a peak of nearly 14% in 2019. Chinese companies limited their global acquisitions after the 2014/15 oil price collapse.
Lu cautioned that given sanctions constraints in key hydrocarbon-rich targets such as Venezuela, Iran and Russia, more practical options include extending existing contracts such as those in Kazakhstan and Indonesia, which are nearing expiration.
"PetroChina's biggest strength is to extract more oil out of aging fields," he said, a capability developed over decades at the vast and still-productive Daqing field in northeast China.
Analysts at Wood Mackenzie predict a revival in international acquisitions by national oil companies (NOCs) after last year's two-decade low as the industry refocuses on oil and gas amid a slowdown in energy transition activity.
"International business development remains a major priority for China's largest NOCs, but they have adopted a cautious approach to deal-making in recent years," Woodmac said.
CNPC may be facing the highest geopolitical hurdles since it first ventured overseas in 1993, said Lu.
Chinese companies have refrained from new investments in Russia as other global firms exited following Russia's war with Ukraine, although China is one of Russia's biggest oil clients and a fast growing buyer of natural gas.
Strained relations with the United States have hindered opportunities there, where $250 billion in deals were made during last year's industry consolidation.
CNPC and PetroChina do not own any US producing assets and PetroChina delisted from the New York Stock Exchange in 2022 because of auditing scrutiny.
Lu also cautioned its alliances combining CNPC's construction and engineering expertise with oil majors' commercial and legal acumen, such as at Kashagan in Kazakhstan with Chevron, have limits as a business model.
"It's challenging to safeguard your interest and access sufficient operational information as a small investor. We would need strong commercial and legal skills which happen to be our weak links," he said.

State Bank of Pakistan Governor Jameel Ahmad said his country aims to raise up to $4 billion from Middle Eastern commercial banks by the next fiscal year, as the country looks to plug its external financing gap.

In a wide-ranging interview with Reuters, Ahmad said Pakistan was also in the “advanced stages” of securing $2 billion in additional external financing required for International Monetary Fund approval of a $7 billion bailout program.

This came as Pakistan is making good progress with the International Monetary Fund and hopes to get board approval in September for a new $7 billion loan program, Pakistan's Finance Minister Muhammad Aurangzeb said last Wednesday.

Pakistan and the IMF reached an agreement on the 37-month loan program in July. The IMF said the program was subject to approval from its executive board and obtaining “timely confirmation of necessary financing assurances from Pakistan's development and bilateral partners.”

In his interview with Reuters on Tuesday, Ahmad said he expected the country's gross financing needs would be smoothly met - both over the next fiscal year and in the medium term.

In addition, Ahmad said the central bank reckoned Pakistan's gross financing needs for the coming years would be lower than the 5.5% of gross domestic product projected by the IMF in its latest country report in May.

Asked about monetary policy, Ahmad said recent interest rate cuts in Pakistan have had the desired effect, with inflation continuing to slow and the current account remaining under control, despite the cuts.

Pakistan's annual consumer price index inflation was 11.1% in July, having fallen from highs of over 30% in 2023.

“The Monetary Policy Committee will review all these developments,” Ahmad said, adding that future rate decisions could not be pre-determined.

Pakistan's central bank cut rates for two straight meetings from a historic high of 22% to 19.5%, and will meet again to review monetary policy on September 12.

There have been some concerns in markets that the government might take advantage of lower interest rates to borrow more, but the central bank chief said this was not his expectation.

“We understand that the government will continue on the path of fiscal consolidation, notwithstanding the reduction in interest rates,” said Ahmad.

Chinese Oil Giant Looks to Revive Global Dealmaking