Sinopec, CNPC and CNOOC are scaling back on investments at home and abroad
Signs of a slowdown? Image: CNPC |
Despite the price of oil falling over the past nine months creating some attractive acquisitions, China's big three oil companies having been relatively modest in their international investments.
Between 2009-2013 the three oil majors completed some $104bn of deals globally, compared to just $9bn made by their US peers.
In 2014, however, the majors made only three deals with a total value of $2.8bn.
According to Chen Weidong, Chief Energy Researcher at the Energy Economics Institute at CNOOC, the majors need time to integrate the assets they have recently acquired, especially since low oils prices are making new investments costlier and increasing the time it takes for them to generate revenue. Many international projects have also generated unexpected losses and have been difficult to get off the ground, claims Chen.
Low oil prices and costly investments have also led to lower cash flow and, despite being backed by state-owned banks, Chinese majors are now having to adjust to a "new normal" of investment levels. As the government is now placing less emphasis on energy security and a placing greater focus on higher quality products in a bid to reduce pollution, the majors are being incentivised to improve R&D at home before making risky acquisitions abroad.
Despite a slowdown amongst China's top producers, the private sector is rushing to fill the gap. More than $50bn of Chinese investment fuelled America's shale boom, with only 20% coming from the big three.
As China's energy landscape changes there will likely be fewer 'mega deals' and a stronger emphasis on consolidation within the industry, predicts Chen.