Why Is The Obama Administration Allowing China To Buy Up U.S. Oil And Gas Deposits?

Sunday, May 13, 2012
Michael Snyder, Contributor
Activist Post

If we are trying to become independent of foreign oil, then why is the Obama administration allowing the Chinese government to buy up U.S. oil and gas deposits worth billions of dollars? This makes absolutely no sense whatsoever. The United States desperately needs to maintain control over its own domestic energy resources so that we can end our addiction to foreign oil.

As I have written about previously, the United States actually has plenty of oil. If we would simply use the resources that we already have, we would never have to import a single drop of foreign oil. But instead, we continue to be the largest importer of oil on the planet and we are allowing China to rapidly buy up oil and gas deposits inside the United States. This is fundamentally wrong and it is a serious threat to our national security. But apparently everything is for sale in the United States today, and that includes our precious energy resources.

The Chinese government is using two giant corporations to buy up these energy resources.

The first is the China National Offshore Oil Corporation (CNOOC). According to Wikipedia, this corporation is 100 percent owned by the Chinese government....

CNOOC Group is a state-owned oil company, fully owned by the Government of the People's Republic of China, and the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC) performs the rights and obligations of shareholder on behalf of the government.

The second is Sinopec Corporation. Sinopec Group is the largest shareholder (about 75% of the shares) in Sinopec Corporation. And as the Sinopec website tells us, Sinopec Group is owned by the Chinese government....

Sinopec Group, the largest shareholder of Sinopec Corp., is a super-large petroleum and petrochemical group incorporated by the State in 1998 based on the former China Petrochemical Corporation. Funded by the State, it is a State authorized investment arm and State-owned controlling company.

So wherever you see CNOOC or Sinopec you can replace those names with the Chinese government. The Chinese government essentially runs both of those companies.

And both companies have been very busy buying up U.S. oil and gas deposits.

For example, CNOOC recently completed a 570 million dollar deal that gives it a one-third interest in huge oil and gas deposits in Colorado and Wyoming. The following is from Wyoming Energy News....

Chinese energy company CNOOC Ltd. has agreed to pay $570 million for a one-third interest in Chesapeake Energy Corp.’s 800,000 leased acres in northeast Colorado and southeast Wyoming. The acreage is in the Denver-Julesburg (DJ) and Powder River basins. CNOOC is China’s biggest offshore oil and natural gas producer.

In fact, according to a recent Business Insider article, this deal gives the Chinese government the right to a third of any new oil discovered by Chesapeake Energy in the entire region....

The Niobrara Shale formation stretches over Colorado and Wyoming, as well as Kansas and Nebraska. Chesapeake Energy's position is in Wyoming and Colorado. If Chesapeake find any more oil in this region, CNOOC has the rights to 33.3% of what is found.

But this is not the only area of the country where China now owns energy rights. The following is an excerpt from a recent state-by-state breakdown that appeared in the Wall Street Journal....

Louisiana: Sinopec has a one-third interest in 265,000 acres in the Tuscaloosa Marine Shale after a broader $2.5-billion deal with Devon Energy. 

Michigan: Sinopec gained a one-third interest in 350,000 acres in a larger $2.5 billion deal with Devon Energy. 

Ohio: Sinopec acquired a one-third stake in Devon Energy’s 235,000 Utica Shale acres in a larger $2.5 billion deal. 

Oklahoma: Sinopec has a one-third interest in 215,000 acres in a broader $2.5 billion deal with Devon Energy. 

Texas: CNOOC acquired a one-third interest in Chesapeake Energy’s 600,000 acres in the Eagle Ford Shale in a $2.16-billion deal.

The Texas deal was particularly noteworthy. The following is how a San Antonio news source described that deal....

State-owned Chinese energy giant CNOOC is buying a multi-billion dollar stake in 600,000 acres of South Texas oil and gas fields, potentially testing the political waters for further expansion into U.S. energy reserves.

With the announcement Monday that it would pay up to $2.2 billion for a one-third stake in Chesapeake Energy assets, CNOOC lays claim to a share of properties that eventually could produce up to half a million barrels a day of oil equivalent.

So why is the Obama administration allowing this to happen?

Are they so desperate to have China continue lending money to the United States that they would allow the Chinese government to pillage our precious energy resources?

Somebody needs to be asking our politicians that question.

But oil and gas are not the only U.S. assets that the Chinese have been buying up.

In a previous article, I detailed how the Chinese have been purchasing huge chunks of real estate all over the country as well.

For example, a recent Forbes article detailed some of the real estate deals that China has been doing in New York....

According to a recent report in the New York Times, investors from China are 'snapping up luxury apartments' and are planning to spend hundreds of millions of dollars on commercial and residential projects like Atlantic Yards in Brooklyn. Chinese companies also have signed major leases at the Empire State Building and at 1 World Trade Center, the report said.

In addition, it was recently announced that the Federal Reserve will now allow Chinese banks to buy up American banks.

Where will all of this end?

Should all of us start learning to speak Chinese?

Meanwhile, our trade deficit with China continues to get even larger. Our trade deficit with China last year was $295.5 billion, which was the largest trade deficit that one country has had with another country in the history of the world. This year, we are already on a pace to break that record.

So thousands of businesses, millions of jobs and hundreds of billions of dollars will continue to leave the United States and go to China.

And China will continue to use some of the money they are getting from us to buy up pieces of America.

Does anyone else out there see something very, very wrong with all of this?

 

I do! I do! Now, read this and see how much more sense it makes linked to the above article.--jef

Mission Accomplished...

Iraq Opens Up to Foreign Oil Majors
Western producers like BP, Exxon Mobil, and Shell are enjoying their best access to Iraq's southern oil fields since 1972, but a weaker government could be on the way

By Anthony DiPaola and Daniel Williams

(Bloomberg) -- BP Plc and Exxon Mobil Corp. took the best deal they could get in Iraq last year when they won the largest oil contracts since addam Hussein was toppled in 2003. Oil companies may wait a long time to get a better one.

Parliamentary elections may produce a weak or unstable government incapable of tendering new oil contracts, said Samuel Ciszuk, a London-based analyst at IHS Global Insight. He said he does expect the 10 technical-services contracts won by Exxon, BP and 20 other companies to be honored.

"One thing that's fairly certain is there won't be a strong coalition, so it may take time for the next government to get its act together," Ciszuk said in a telephone interview.

"Bottlenecks could hold up production increases" if no government forms by June.

Western producers haven't had access to oil fields in southern Iraq since 1972, when the country nationalized production including concessions owned by the companies now known as BP, Royal Dutch Shell Plc and Exxon.

The contracts awarded in two auctions, which pay a per-barrel fee for development work rather than granting a share in the production itself, will cost the companies a total of about $100 billion to develop deposits, Oil Minister Hussain al-Shahristani said in December. Iraq, with the world's third-largest oil reserves, will earn about $200 billion a year.

SERVICE FEES
A group led by BP, which vies with Shell as Europe's largest oil company, will receive $2 billion per year in fees to develop the Rumaila field. A Shell-led group will get $913 million and a group led by Exxon, the largest U.S. oil company, will receive $1.6 billion per year. Each calculation is based on the agreed-to per-barrel fee times the maximum production level.

"We see this as the beginning of a long-term relationship with Iraq and will continue to look for further opportunities," Andy Inglis, BP's chief executive for exploration and production, said on a conference call March 2.

Prime Minister Nouri al-Maliki, whose government signed last year's oil contracts, is running against an array of opponents. Sunni Muslim, Shiite Muslim and Kurdish factions, along with a pan-sectarian party, all are in the race with Al-Maliki's Shiite-based Rule of Law coalition.

The sectarian blocs are also divided one against another, making it unlikely any one group can win a majority.

"This is the most wide-open election in Iraq's history," said Faleh Abdul-Jabar, director of the Beirut-based Iraq Institute for Strategic Studies, in a telephone interview.

TROOP WITHDRAWAL
U.S. troop levels will fall to 50,000 from the current 97,000 by August of this year, according to a schedule laid out by President Barack Obama in February 2009. All troops will leave by the end of 2011 under an agreement with the Iraqi government reached by President George W. Bush.

A change in Iraq's government won't affect contracts signed last year, al-Shahristani said in a March 2 interview in Baghdad. The amount of work needed on the contracts means the oil companies can afford to wait for a new government to form and consolidate its power before pressing for fresh production or exploration contracts.

The only region where companies participate in more than fee-for-service work is in Iraq's north. Companies including Norway's DNO International ASA are pumping crude in the Kurdish autonomous region under production-sharing agreements not recognized by the central government.

Indecision over forming a government could delay investment in oil projects, said David Bender, a Middle East analyst at Eurasia Group in Washington.

MOST ATTRACTIVE
"Iraq is one of the most attractive oil markets in the world," Bender said. "The international oil companies may feel that getting in at the beginning improves their long-term prospects."

Winning contracts to explore undiscovered and untapped deposits under more favorable terms is a long-term goal for producers operating in Iraq, said two officials with oil companies that won contracts last year. The officials asked not to be identified since they aren't allowed to speak publicly about company policies in Iraq.

Iraq has much work ahead to meet its production goals, so new exploration agreements are unlikely to be signed soon, said Centre for Global Energy Studies in London.

"People are going to ask, 'Why should we sell resources that can't be reproduced? What is the rush?'" he said.

London-based BP and China National Petroleum Corp. agreed in June to produce 2.85 million barrels a day at Rumaila, the only field locked up in the first round and one of Iraq's largest.

Exxon, based in Irving, Texas, together with Shell, based in The Hague, pledged to pump 2.33 million barrels of crude a day from the first phase of the West Qurna field. Patrick McGinn, a spokesman for Exxon, said in a March 3 e-mail that the company doesn't comment on political issues.

Shell also was the lead partner with Malaysia's Petroliam Nasional Bhd., or Petronas, winning a contract to boost output at the Majnoon field to 1.8 million barrels of oil a day.

"Big or small, no company wanted to be left out of Iraq," Takin said.