Nexen’s US Gulf oil fields key to CNOOC’s deepwater ambitions

1 / 2
2 / 2
Updated 14 December 2012
0

Nexen’s US Gulf oil fields key to CNOOC’s deepwater ambitions

HONG KONG: CNOOC Ltd’s purchase of Canadian energy producer Nexen Inc. may prove to be bittersweet if US regulators block the Chinese state-run oil company from taking over Nexen’s oilfields in the Gulf of Mexico.
CNOOC won a major coup recently by securing Ottawa’s consent for the $ 15.1 billion deal, China’s largest ever overseas acquisition, but the company is still waiting for approval from the US government.
While the Gulf assets are just a fraction of Nexen’s reserve base and production, they would give CNOOC a foothold in the world’s premier deepwater oil province from which to acquire the technical know-how to drill in the contested South China Sea.
“The Nexen prize is the hi-tech ultra-deepwater drilling tech,” said a person familiar with CNOOC’s business strategy, adding that the Gulf of Mexico assets were “one of the key reasons that they are buying Nexen.”
Approval from Washington is also important to CNOOC as it wants to be endorsed as an acceptable operator in the United States after American politicians blocked its high-profile bid for Unocal in 2005, according to another source.
A rejection would not sink the entire deal — CNOOC is ready to buy Nexen excluding the US assets, people familiar with the situation said. But it would be a major blow to CNOOC’s deepwater ambitions.
An acquisition of the Gulf of Mexico assets would make CNOOC the operator of deepwater producing assets for the first time, giving it the prized opportunity to grasp the expertise it desperately needs to realize its production target.
China, the world’s largest energy user, is already relying on imports for more than half of its oil needs. The country has long hoped to expand deepwater exploration in the South China Sea as onshore production growth sags.
CNOOC, which derives nearly all its domestic output from shallow waters, has vowed to build deepwater capacity of 1 million barrels of oil equivalents per day by 2020, more than doubling the company’s total production.
Buying Nexen — most of whose reserves are oil sands and shale gas in Canada and crude oil in the North Sea — would mark a “material entry into the Gulf of Mexico” and an “increase in access to deepwater expertise,” CNOOC said in a July presentation after it announced its bid for Nexen.
As the Committee on Foreign Investment in the US, or CFIUS, examines whether the deal presents any threats to national security, a handful of US politicians have voiced concerns. One issue the committee will examine, CFIUS experts say, is whether Nexen’s assets are too close to sensitive US military areas.
Senator James Inhofe, soon to be the top Republican on the Senate Armed Services Committee, said this week he hopes CFIUS forces CNOOC to divest the assets.
“It’s the same as it would be when I object to their presence in our borders in California, or the Panama canal — they’re not our reliable ally,” Inhofe said.
Under US law, CFIUS operates in complete secrecy and it is not known when it may make a decision or which way it is leaning. CNOOC has declined comment on the review and Nexen had no immediate comment.
CNOOC was forced to abandon its $18.5 billion bid for California-based Unocal in 2005 because of bitter opposition on sovereignty grounds from US lawmakers. The rebuke influenced its bid for Nexen, and it carefully prepared for the review processes it would face.
Some energy analysts and investment bankers not involved in the transaction say they believe the US government would approve the deal, perhaps with some agreements on who operates the rigs, as CNOOC is just buying a relatively small portfolio in the Gulf.
Nexen produced 22,000 barrels of oil equivalent per day in the region in 2011, less than 2 percent of overall Gulf of Mexico production. The Gulf accounts for around 10 percent of Nexen’s production and 5 percent of its proved and probable reserves, according to recent company statements.
Foreign oil and gas companies are very common in the Gulf both as operators and lease owners — Royal Dutch Shell and BP Plc are the two largest oil producers there. Brazil’s state-controlled Petrobras also has a substantial position in the Gulf.
Analysts and bankers also pointed to the approval of recent acquisitions of minority stakes in some US onshore oil and gas assets by CNOOC and China’s Sinopec Group, parent of Asia’s largest refiner Sinopec Corp.
“I am going to toss the coin and say look, given Canada has approved, it is more likely now the US will approve,” said Simon Powell, head of Asian oil and gas research at CLSA in Hong Kong.
But CFIUS standards can often be murky. For instance, a privately owned Chinese company was blocked in September from building wind turbines close to a Navy military site used to test unmanned drones in Oregon.
As China’s energy demand soars, CNOOC and other state Chinese oil firms like Sinopec Group have been venturing into deepwater projects in partnership with global oil majors such as Total and Shell in west Africa and offshore Brazil in the last few years.
But the Chinese firms mostly play a minority, passive role in such projects, with limited access to deepwater exploration and production know-how and hence with lack of exposure to the entire operational process.
That leaves an acquisition as the other route to acquiring new technical expertise.
“What they could learn in the Gulf of Mexico could be deployed back into the domestic, South China Sea exploration in terms of best practices in the longer term,” said Gordon Kwan, head of energy research at Mirae Asset Securities in Hong Kong.
CNOOC launched its first ultra-deepwater rig earlier this year and it is drilling south of Hong Kong in an area within Beijing’s ambit.
Industry watchers expect CNOOC will eventually move the $1 billion rig to explore in deeper and more oil-rich waters further south in the South China Sea, where China, Vietnam, the Philippines, Taiwan, Malaysia and Brunei have overlapping territorial claims.
The deepwater area of the South China Sea remains untapped, largely because tensions between rival claimants have made oil companies and private rig-builders reluctant to explore contentious acreage well away from sovereign coastlines.
Rich hydrocarbon resources are believed to lie below the center and south of the South China Sea, which is in the disputed zone.
Estimates for proven and undiscovered oil reserves in the entire sea range from 28 billion to as high as 213 billion barrels of oil, the US Energy Information Administration said in a March 2008 report.
That would be equivalent to more than 60 years of current Chinese demand, under the most optimistic outlook, and surpass every country’s proven oil reserves except Saudi Arabia and Venezuela, according to the BP Statistical Review.
Chinese state media have called the South China Sea “the second Arabian Gulf.”
CNOOC also hopes to use the acquisition of Nexen to form a foundation for growth in the Gulf of Mexico, analysts say. Currently, it just owns a minority stake in a deepwater joint venture project with Nexen in the Gulf and some relatively small assets divested by Norway’s Statoil in 2009.
Its deepwater capabilities should also benefit from Nexen’s projects in the North Sea.
Nexen has 43 percent of the Buzzard oilfield in the North Sea, Britain’s largest pumping about 200,000 barrels per day.
They are not deepwater projects but CNOOC can learn how to deal with harsh weather — expertise also key for CNOOC to expand its deepwater footprint, analysts say.
“You learn how to conduct drilling in extreme weather. It is not deep water but it is harsh weather,” said Mirae’s Kwan.


Twitter suspended 58 million accounts in 2017 fourth quarter

Updated 18 July 2018
0

Twitter suspended 58 million accounts in 2017 fourth quarter

  • Twitter executives say efforts to clean up the platform are a priority
  • Company struggling with user growth compared to rivals like Instagram and Facebook

NEW YORK: Twitter suspended at least 58 million user accounts in the final three months of 2017, according to data obtained by The Associated Press. The figure highlights the company’s newly aggressive stance against malicious or suspicious accounts in the wake of Russian disinformation efforts during the 2016 US presidential campaign.
Last week, Twitter confirmed a Washington Post report that it had suspended 70 million accounts in May and June. The cavalcade of suspensions has raised questions as to whether the crackdown could affect Twitter’s user growth and whether the company should have warned investors earlier. The company has been struggling with user growth compared to rivals like Instagram and Facebook.
The number of suspended accounts originated with Twitter’s “firehose,” a data stream it makes available to academics, companies and others willing to pay for it.
The new figure sheds light on Twitter’s attempt to improve “information quality” on its service, its term for countering fake accounts, bots, disinformation and other malicious occurrences. Such activity was rampant on Twitter and other social-media networks during the 2016 campaign, much of it originating with the Internet Research Agency, a since-shuttered Russian “troll farm” implicated in election-disruption efforts by the US special counsel and congressional investigations.
Suspensions surged over the fourth quarter. Twitter suspended roughly 15 million accounts last October. That number jumped by two-thirds to more than 25 million in December.
Twitter declined to comment on the data. But its executives have said that efforts to clean up the platform are a priority, while acknowledging that its crackdown has affected and may continue to affect user numbers.
Twitter said in April it had 336 million monthly active users, which it defines as accounts that have logged in at least once during the previous 30 days. The suspended accounts do not appear to have made a large dent in this number, which was up 3 percent from a year earlier. Twitter maintains that most of the suspended accounts had been dormant for at least a month, and thus weren’t included in its active user numbers.
Michael Pachter, a stock analyst with Wedbush Securities, said he thinks the purge late last year may have been part of an initial sweep of inactive accounts that had little effect on activity or advertising revenue. But he said he expected advertising revenue to fall 1 to 2 percent due to the more recent purge last week, when Twitter said it was removing frozen accounts from follower counts.
He expects the company to be upfront about the impact when it announces quarterly earnings on July 27, and said the cleanup is good for users and advertisers. “They’re certainly doing the right thing,” he said.
Scott Kessler, an analyst with CFRA who has a “sell” rating on Twitter stock, said multiple reports and vague clarifications by executives are creating uncertainty about what Twitter’s numbers really mean.
The purge activity “adds a level of uncertainty,” he said. “As an analyst, I want a more genuine view of the user base.”
Chief Financial Officer Ned Segal said in February that some of the company’s “information quality efforts” that include removing accounts could affect monthly user figures. Segal offered no specifics.
Six months later, in late June, Twitter disclosed that its systems found nearly 10 million “potentially spammy or automated accounts per week” in the month of May, and 6.4 million per week in December 2017. That’s up from 3.2 million per week in September. The company didn’t say how many of these identified accounts were actually suspended.
Following the Post report, which caused Twitter’s stock to drop sharply, Segal took to Twitter to reassure investors that this number didn’t count in the company’s user metrics. “If we removed 70M accounts from our reported metrics, you would hear directly from us,” he tweeted last Monday .
Shares recovered somewhat after that tweet. The stock has largely been on an upswing lately, and more than doubled its value in the past year.
Twitter is taking other steps besides account deletions to combat misuse of its service, working to rein in hate and abuse even as it tries to stay true to its roots as a bastion of free expression. Last fall, it vowed to crack down on hate speech and sexual harassment and CEO Jack Dorsey echoed the concerns of critics who said the company hasn’t done enough to curb such abuse.