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A British firm will control Libyan oil field company October 7, 2011

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British company Heritage Oil PLC said Tuesday that it has acquired a controlling interest in a Libyan company licensed to provide oil field services including offshore and land-based drilling.

Heritage said it paid $19.5 million for a 51 percent stake in Sahara Oil Services Holdings Ltd. Heritage said the acquisition will allow it to play a significant role in Libya’s oil and gas industry.

Sahara Oil Services was established in 2009 and is based in Benghazi.

Heritage established a base in Benghazi this year and has been dealing with senior members of the National Transitional Council, the company said.

Richard Griffith, analyst at Evolution Securities, said the move “could prove to be a very shrewd investment” by the company.

Heritage Oil shares, however, were down 2.9 percent at 217.8 pence in early trading on the London Stock Exchange.

The company’s CEO Tony Buckingham said they are “well placed to play a significant role in the future oil and gas industry in Libya.”

“This acquisition is consistent with Heritage’s first mover strategy of entering regions with vast hydrocarbon wealth where we have a strategic advantage,” Buckingham said.

Heritage has exploration projects in the Kurdistan Region of Iraq, the Democratic Republic of Congo, Malta, Pakistan, Tanzania and Mali, and a producing property in Russia.

Seneca Resources not giving up Marcellus partnership September 8, 2011

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Natural gas and oil company Seneca Resources Corp. said Thursday that it expects the production rate at its operations in the Marcellus Shale to reach 150 million cubic feet per day by Sept. 30, and 240 million cubic feet per day 12 months later.

Those dates coincide with the end of the National Fuel Gas unit’s fiscal 2011 and 2012.

The Marcellus Shale is rock containing a rich deposit of natural gas that extends through the Appalachian Basin.

“Our production rates will be ramping up substantially in the last quarter of this fiscal year as groups of new wells are brought on line,” said Matthew Cabell, Seneca’s president.

The production rate forecast is the same regardless of whether Seneca is working the Marcellus shale alone or takes on a partner, the company said.

Seneca has been in talks with potential partners in a joint venture to develop the Marcellus Shale, and has received several offers, the company said.

National Fuel Gas Co., an energy company based in Williamsville, N.Y., had anticipated reaching a decision on a partner by the end of last month, but it is still evaluating the offers, said David Smith, National Fuel’s chairman and CEO.

“While discussions are ongoing, as we’ve said in the past, we will only move forward with a transaction on terms that we believe add value to our shareholders over and above the value that Seneca will likely achieve through its currently planned operations,” he said.

Shares of National Fuel Gas Co. ended the regular session down $1.20 at $69.62.

ENI invests in Venezuelan oil August 14, 2011

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Italian energy company Eni said it would contribute as much as $1.5 billion to a state energy company to develop the Junin 5 block off the coast of Venezuela.

Eni Chief Executive Officer Paul Scaroni met in Caracas with Venezuela’s Energy Minister Rafael Ramirez, also president of state oil company Petroleos de Venezuela SA to discuss projects in the Orinoco belt.

Eni signed deal in Venezuelan to exploit the Junin 5 oil block in the Orinoco oil belt in the Caribbean Sea last year.

Eni had said it hopes to produce around 75,000 barrels of oil per day from the site during early production phases set for 2013. Long-term production, the company said, could reach 240,000 bpd in 2018.

Eni in a statement Friday said the “primary topic of discussion” was developing Junin 5. The company said the reserve holds 35 billion barrels of certified oil in place.

Eni in its statement said it agreed to provide up to $1.5 billion to help PDVSA develop its share of the production phase of Junin 5.

NYSE: Marathon Petroleum Group enters the big league July 4, 2011

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Marathon Petroleum Corp. has debuted on the New York Stock Exchange as the second- largest U.S. independent oil refiner after surging gasoline prices drove a year long rise in refining stocks.

Marathon Petroleum is being spun off from parent Marathon Oil Corp. (MRO) amid growing investor demand for companies that can capitalize on gasoline prices that rose at twice the rate of crude oil in the past 12 months, said Sam Margolin, an analyst at Dahlman Rose & Co.

The refiner is valued at $14.7 billion in unofficial trading permitted by exchanges to help investors gauge demand, on par with the largest independent refiner, Valero Energy Corp., which has twice the fuel-making capacity. Marathon Petroleum is poised to capture higher margins thanks to upgrades at plants that account for half the company’s oil processing, said Jacques Rousseau, an analyst at RBC Capital Markets LLC.

“It’s seen as a new name in a group of companies that have run up aggressively in the past year, and people think it’s an opportunity to buy a stock that doesn’t have a chart showing a year’s worth of massive gains behind it,” said Margolin in a telephone interview from New York.

Marathon Oil Chief Executive Officer Clarence Cazalot in January revived a plan to split off the refining division after years of frustration that the fuel-producing unit was a drag on the value of the company’s more profitable crude and natural-gas business. Cazalot, a former exploration chief at Texaco Inc., canceled the original spinoff in February 2009 after the global financial collapse deflated equity markets.

Asset Sales

Since then, Marathon Oil has sold off $1.9 billion in refining, storage, pipeline and retail assets, including a plant in Minnesota, and hundreds of convenience stores. The margins earned in the U.S. from processing crude into fuels during that time almost tripled as the recession ended and energy demand rebounded.

Since assuming the top job at Marathon Oil when it was spun off by U.S. Steel Corp. in 2002, Cazalot, 60, has quadrupled net income and expanded the company’s search for oil and gas to Iraq, Indonesia and Poland. On June 1, the company agreed to pay $3.5 billion to Hilcorp Resources Holdings LP for Texas leases that may add the equivalent of 100 million barrels of crude to its reserves by the end of this year.

As a result of the transaction, Cazalot raised his production-growth estimate through 2016 to 5 percent to 7 percent a year from a previous forecast of 3 percent to 5 percent.

Shares Lag

Marathon Oil posted share price gains averaging 7 percent for the past five years, lagging Los Angeles-based Occidental Petroleum Corp. and Anadarko Petroleum Corp. of The Woodlands, Texas, which rose 17 percent and 10 percent a year, respectively. Neither Occidental nor Anadarko engage in refining.

Marathon Petroleum’s margins probably will widen starting in late 2012 after the completion of a $2.2 billion upgrade to the company’s Detroit refinery that will boost its ability to process cheaper crude, RBC’s Rousseau said in a telephone interview.

The Detroit project will increase the refinery’s capacity to handle heavy crude from Canada’s oil sands to 100,000 barrels a day from 20,000 barrels, Rousseau said. Heavy Canadian crude sells for 20 percent to 30 percent less than the lighter types of oil from the Gulf Coast that the Detroit refinery currently primarily runs, he said.

Rousseau, who has an outperform rating on Marathon Petroleum, estimates the Detroit upgrade will add $1 to Marathon Petroleum’s annual per-share earnings. He expects the shares to reach $50 within a year.

“There’s a lot to like with this story,” Rousseau said.

Refining Consolidation

As a stand-alone refiner, Marathon Petroleum will have more volatile earnings than its parent because retail fuel markets tend to fluctuate seasonally, said Ted Harper, an asset manager at Frost Investment Advisors in Houston, who helps manage about $6.8 billion. Frost Investment is a subsidiary of Cullen/Frost Bankers Inc. which held 23,797 Marathon shares as of a March 31 filing.

“They may need to smooth out their earnings stream,” Harper said. Marathon should expand its refining base through acquisitions, or add to its logistics business, which includes the largest U.S. barge fleet, he said.

The U.S. refining industry has consolidated in the past six years as fuel makers, faced with soaring crude costs, cut operating expenses and shed their least-efficient plants. The transactions have included Valero’s 2005 acquisition of Premcor Inc., Western Refining Inc.’s purchase of Giant Industries Inc. in 2007, and Holly Corp.’s planned merger with Frontier Oil Corp., which is expected to close tomorrow.

Texas City

Marathon Petroleum may seek to buy BP Plc’s Texas City refinery near Houston, the biggest U.S. plant ever to be sold as a single asset, said Neil Earnest, practice leader of merger’s and acquisitions at Muse, Stancil & Co., a consulting firm in Dallas.

BP’s Texas City refinery is the third-largest in the U.S. by virtue of 475,000 barrels of daily crude-processing capacity, according to Bloomberg data. The plant is larger than anything in Marathon’s refining portfolio and would provide the ability to export diesel to South America, Earnest said.

BP will have to lower its $2.9 billion asking price for the Texas City refinery before Marathon Petroleum could afford it, said Mark Sadeghian, senior director of energy at Fitch Ratings in Chicago.

Marathon Petroleum will trade under the symbol MPC on the New York Stock Exchange.

Is IEA oil release a stimulus measure for consumers? June 27, 2011

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The International Energy Agency’s planned release of oil from reserves is being used as an economic stimulus measure that will serve as a “tax cut” for consumers if it’s successful in driving down prices, according to a report today from IHS-Cambridge Energy Research Associates.

The release from emergency stockpiles of 60 million barrels of oil, or 2 million barrels a day for 30 days beginning next week, follows a disruption in supplies from Libya and could boost both consumer spending power and confidence, according to IHS-CERA’s Daniel Yergin and James Burkhard.

“Although oil prices have come down since Brent reached $126 per barrel in April, worries about the potential for another economic slowdown have grown,” the report said. “The oil release signals that IEA members are taking into account the broader macroeconomic environment to decide on using strategic reserves.”

Oil for August delivery declined 25 cents to $90.77 a barrel at 2:04 p.m. on the New York Mercantile Exchange. Prices have fallen 2.8 percent this week and gained 19 percent in the past year.

Repsol and Alliance form a Russian joint venture June 18, 2011

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How will the $800M joint venture work? Repsol will contribute cash to support growth of the joint venture and Alliance Oil will contribute producing oil assets in the Russian Federation.

Repsol and Alliance Oil Company have signed a Memorandum of Understanding to form a joint venture that will serve as a growth platform for both companies in the Russian Federation, the world’s largest oil and gas producer.

Alliance Oil will hold a 51% stake in the joint venture and contribute producing assets in the Volga-Urals Region while Repsol will own the remaining 49% and make an initial cash investment to finance future growth opportunities.

The agreement seeks to combine Alliance Oil’s knowledge and privileged access to Russian exploration and production business opportunities with Repsol’s know-how and technical capabilities to create a long-term exploration and production alliance.

In addition to the exploitation of the assets to be contributed by Alliance Oil, the agreement includes seeking opportunities for exploration and growth through producing assets in the Russian Federation.

‘This cooperation with Alliance Oil enables Repsol to increase its producing assets and obtain privileged access to assets in the country, home to some of the largest hydrocarbon resources in the world, reinforcing this growth vector of our group”, said Repsol Executive Chairman, Antonio Brufau.

‘We are pleased to develop our partnership with Repsol and together create an additional important strategic upstream growth platform in Russia. I am convinced that the joint venture will create significant value for our shareholders and make a meaningful contribution to our reserves and production,’ said Eric Forss, Chairman of Alliance Oil Company ltd.

Repsol already owns a 3.47% stake in Alliance Oil resulting from the merger between Alliance Oil and West Siberian Resources in 2008. Repsol also owns a 74.9% stake in Eurotek-Yugra, which holds exploration and production licenses in the Karabashsky-1 and -2 blocks in the prolific West-Siberia basin.

The transaction is subject to negotiation of final contractual terms, due diligence of the assets to be contributed by Alliance Oil and the procurement of the relevant regulatory and corporate approvals, which is expected to be completed during 2011.

Exxon discovers deepwater oil and gas in Gulf of Mexico June 8, 2011

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Exxon Mobil Corp. (XOM) unveiled two major oil discoveries and a gas discovery in the deepwater Gulf of Mexico with the potential for the recovery of more than 700 million barrels of oil equivalent.

Shares were up 2.1% to $81.68 in early trading. The stock is up 33% in the past year amid an industry rebound driven by high oil prices.

The world’s largest publicly traded oil company said the find was made after it drilled its first exploration well in the region since the nine-month U.S. moratorium following the Deepwater Horizon disaster was lifted.

The announcement follows Noble Energy Inc.’s (NBL) disclosure at the end of May that it had struck oil at its Santiago prospect.

“This is one of the largest discoveries in the Gulf of Mexico in the last decade,” Steve Greenlee, president of Exxon Mobil’s exploration business said. “More than 85% of the resource is oil with additional upside potential.”

The well, which encountered more than 475 feet of net oil pay, is located in the Keathley Canyon region, about 250 miles southwest of New Orleans, in about 7,000 feet of water.

Exxon in April reported its first-quarter earnings surged 69% as the company benefited from high oil prices, stronger refining margins and a jump in natural gas production.

Schlumberger goes up despite desappointing results April 21, 2011

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Schlumberger Ltd (SLB.N), the world’s largest oilfield services company, posted a lower-than-expected quarterly profit on Thursday, but said customer demand would rise, sending its share price up.

Oil prices have climbed above $110 a barrel, prompting producers, including Saudi Arabia, to ramp up spending on new fields to increase their output capacity and make up for supplies that have been cut off from Libya.

“The absence of Libyan production worries the oil producers. They do not like too high… oil prices because of the potential it has to destroy demand,” said Chief Executive Andrew Gould. “I think that I’m much more confident that the international stream is going to come back faster.”

Still, Schlumberger’s first-quarter operations were hurt by the unrest in energy-rich countries Egypt, Tunisia and Libya.

Flooding in Australia and poor weather in North America also dampened its business, but Gould said the energy industry was spending heavily to make up for Libya and higher demand for gas and fuel oil in Japan.

One analyst said the company’s profit margins remained healthy compared to its peers.

“They’ve essentially caught up to Halliburton in North American margin performance,” said Kurt Hallead, an analyst with RBC Capital Markets in Austin, Texas.

Halliburton (HAL.N), the global No. 2 in oilfield services and market leader in North America, topped market expectations on Monday, with its first-quarter earnings [ID:nN15257560] boosted by its business in the United States.

Schlumberger’s first-quarter profit rose to $944 million, or 69 cents per share, from $672 million, or 56 cents per share, a year earlier.

Excluding one-time items, Schlumberger earned 71 cents per share, compared with the 76 cents that analysts expected, according to the average on Thomson Reuters I/B/E/S.

Schlumberger warned late last month that turmoil would knock 8 to 10 cents per share off its first-quarter earnings. [ID:nN28176824].

Revenue rose 56 percent to $8.72 billion, slightly below the average analyst forecast of $8.82 billion.

Earlier on Thursday, Weatherford International Ltd (WFT.N), the world’s fourth-largest oilfield services company, reported a first-quarter profit compared with a loss a year earlier, helped by higher revenue in the company’s North America segment. [ID:nL3E7FL0FX]

Schlumberger’s shares rose 1.4 percent to $89.09 per share on the New York Stock Exchange, bringing its gain so far this year to nearly 7 percent

Commodity traders make final stand March 30, 2011

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A global push to damp down wild swings in oil and other commodity prices reached a pivotal point Monday as big traders mounted their last attack on a U.S. plan to limit the role of speculators.

Many of the world’s biggest commodity market participants such as U.S. agribusiness giant Cargill Inc are resisting new rules that would cap how many futures and related swaps contracts any one company can control.

The plan to impose “position limits”, which has been under debate since prices first surged to records in 2007 and 2008, is now reaching its culmination, with companies rushing to submit their views to the U.S. Commodity Futures Trading Commission by Monday’s deadline.

So far, most are reframing familiar complaints: Banks, traders and exchanges opposing the CFTC plan say it would make it harder for them to hedge risk, and that it would reduce liquidity and increase costs for consumers. If the proposed rules are adopted with no change, “there is a substantial risk that they would undermine the efficiency of the markets for hedgers, by reducing liquidity and disrupting markets which currently function well”, Linda Cutler, a Cargill vice president, said in a letter to the agency.

But at a time when oil, grain and metal prices have again shot up, some reaching new heights, consumers too are looking for some regulatory relief. Politicians are stepping up pressure for action.

“The banks think this rule is too strong. Commercial end users, consumers, unions … think it’s far too weak,” Michael Greenberger, a University of Maryland law professor and former senior CFTC staffer, told Reuters Insider.
“As the American public starts suffering from $4 a gallon gasoline … the issue becomes more visible, the debate between the consumer and the big banks is more highlighted,” he said.

From Chicago and New York to London and Paris, the commodities markets influence prices for energy, metals, food and other products that hit consumers in areas such as the gas pump and the kitchen table, and so are politically volatile.

The CFTC polices the markets and is under orders from Congress to address perceptions that speculators periodically drive sharp swings in commodity prices that hurt consumers and producers. The CFTC plan would apply to exchange-traded futures and related over-the-counter swaps in 28 energy, metals and agricultural markets.

A 60-day period for public comment on it ends Monday. The CFTC must next read the comments and decide whether to change the proposal. Its five commissioners must then vote. Support for the plan is uncertain within the CFTC. The agency’s chairman, Gary Gensler, may have trouble mustering the three votes needed to finalize it. A final vote may not come for some time.

The “position limits” fight comes as regulators worldwide are working to draw up and implement hundreds of new rules for banks and markets following the 2007-2009 financial crisis, which unleashed a wave of reform efforts.

France favors a crackdown on commodity market speculation in its role as 2011 chair of the Group of 20 major economies. French officials blame speculation for worsening a surge in food prices last year amid fears that such swings fuel political unrest, particularly in the developing world.

“While the Europeans, and particularly the French, share CFTC Chairman Gensler’s concern about commodity prices, there is some skepticism among EU regulators that hard position limits are the right answer,” said Joseph Engelhard, a policy analyst at advisory firm Capital Alpha Partners. “The U.S. hard position limit approach leaves open the possibility that the regulators might overshoot their target levels and actually increase volatility.”

Although it is meant primarily to limit holdings by the funds and investors who have diversified into commodities over the past decade, the CFTC’s plan threatens business models that have generated profits for years for some of the financial world’s biggest players.

The market leaders include firms such as Goldman Sachs and JP Morgan Chase & Co. U.S. banks took in $5.5 billion in revenues trading in commodity markets last year, versus a record $11 billion in 2009, the U.S. Office of the Comptroller of the Currency said.

The 2010 figures represented just under 10 percent of the industry’s trading revenues. The decline from 2009 was due largely to decreased volatility and reduced hedging, officials have said, but also reflected less risk-taking by the banks.

Traders argue there is no evidence that speculators inflate prices, and say curbs could make prices more volatile. The CFTC’s economists have not found a causal link between speculation and price volatility, with one study showing commodity index traders are not causing price volatility, but may actually be helping to reduce it.

The agency’s effort was mandated by Congress in the Dodd-Frank financial regulation reforms made law in July 2010. But as in many other parts of that sprawling legislation, Congress left it up to regulators to hammer out the details.

“We challenge the fundamental premise upon which the CFTC argues that it has authority to impose position limits under Dodd-Frank,” said the International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association, both industry groups, in a letter to the CFTC. “The proposed rules do not set forth why the proposed limits are necessary or appropriate.”

Earlier this month, Democratic Senator Maria Cantwell urged the CFTC to crack down on oil speculation that she said was likely contributing to recent gas price spikes. In a letter to Gensler, Cantwell and 11 other senators urged him to use his Dodd-Frank authority against “excessive speculation”.

“While oil speculators on Wall Street may be profiting from Middle East turmoil … families and businesses on Main Street are footing the bill at the gas pump,” Cantwell said in a statement on Friday.

China’s CNOOC keeps an eye on Texan oil October 10, 2010

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State-owned Chinese energy giant CNOOC is buying a multibillion-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 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.

It also may pick up some American know-how about tapping the hard-to-get deposits trapped in dense shale rock formations, analysts said.

As part of the deal, the largest purchase of an interest in U.S. energy assets by a Chinese company, CNOOC has agreed to pay about $1.1 billion for a chunk of Chesapeake’s assets in the Eagle Ford, a broad oil and gas play that runs roughly from southwest of San Antonio to the Mexican border. CNOOC also will provide up to $1.1 billion more to cover drilling costs.

The deal represents China’s second try at making a big move into the U.S. oil and gas market, following a failed bid five years ago to buy California-based Unocal Corp. Intense political opposition over energy security concerns derailed that $18.4 billion deal. But analysts expect few political or regulatory hurdles to the CNOOC-Chesapeake deal.

“The climate is much more hospitable now,” said Juli MacDonald-Wimbush, a partner with Marstel-Day, an energy and environmental security consultancy in Fredericksburg, Va. Amid low natural gas prices and a largely uneconomic drilling climate, she said highly liquid Chinese companies will find willing partners among onshore oil and gas companies hurting for capital to drill.

“They have the cash, and energy companies in the U.S. are looking for the cash to develop these reserves,” MacDonald-Wimbush said.

Aubrey McClendon, CEO of Oklahoma City-based Chesapeake, said he hasn’t heard any objections to the sale. Unlike China’s Unocal bid, the latest deal doesn’t involve technology transfers or a direct investment in Chesapeake, he said, and CNOOC employees won’t work for Chesapeake, which will continue to operate the project.

“This is a pretty simple business transaction,” McClendon said. “The initial feedback we’re getting is that this is something the government should be very happy to see, which is the return of American capital into our country so that we can use it to create high-paying American jobs and also reduce oil imports a few years down the road.”

20,000 new jobs

McClendon projected the sale would create as many as 20,000 jobs, directly and indirectly, and, on CNOOC’s dime, allow the company to increase its rig count in South Texas from 10 rigs to about 40 by the end of 2012.

Analysts have suggested that much of CNOOC’s interest is in gaining technical insight.

Gas and oil locked in the nation’s plentiful shale formations is abundant but difficult to extract. The deposits, known as unconventional plays in the business, have attracted growing interest in recent years because of improved technology in hydraulic fracturing, which frees hydrocarbons by pumping fluid and sand into reservoirs to crack the rock.

Chesapeake, one of the nation’s largest independent oil and gas firms, was an early mover in the shales, leasing up land aggressively earlier this decade.

“From the Chinese perspective, this is a golden opportunity for them. They have identified shale resources in China but they don’t have the knowledge or technical expertise to go after those resources,” said Ken Medlock, a fellow at Rice University’s Baker Institute and adjunct professor in Rice’s department of economics.

McClendon disputed that notion, saying directional drilling and hydraulic fracturing are now “off the shelf technology” available to anyone.

“This is more of a financial investment on the part of CNOOC, rather than any part of a grand plan to be able to do this themselves. I think they can probably do it themselves right now in China if they were so inclined,” McClendon said.

Still, CNOOC will gain understanding about how shale projects are conceived, planned and executed, and what kind of expertise is needed to pull them off efficiently, MacDonald-Wimbush said.

Also underlying the move is China’s need to find new energy sources — and the technology to develop them – to feed its expansive economic growth. The country’s share of world gross domestic product is expected to rise from 8.4 percent to 26.8 percent by 2025, surpassing the United States’ share, projected to fall to 16.2 percent, according to IHS CERA.

Soaring need for energy

Energy consumption in the world’s most populous nation has doubled in less than a decade, and the International Energy Agency reported in July that China surpassed the U.S. in the total energy used in 2009. On a per capita basis, U.S. still consumes more.

China has increasingly been looking to the Americas for raw materials it needs to sustain the boom. As private investment dwindled with the global financial crisis that began two years ago, the cash-flush Chinese went on a regional shopping spree.

“It’s really kind of exploded. All of a sudden you’ve started to see a lot of large-scale purchases,” said Evan Ellis, an expert on China’s involvement in the region who teaches at the Center for Hemispheric Defense Studies in Washington. “Basically Latin America is becoming a Pacific oriented region.”

China has poured some $20 billion in loans and direct investments into Brazil’s offshore oil exploration and production, for example, and last spring the Chinese government loaned $20 billion to Venezuela to develop oil fields in its Orinoco River basin, with much of the work awarded to Chinese companies.

Other nations interested

Jeff Schlegel, co-head of the global energy practice at Jones Day in Houston, said interest in Chesapeake’s shale play is hardly limited to China. Strategic and financial investors from all parts of the world are looking to take advantage of the economic upside, he said, while others are seeking operating experience.

“It is no surprise that an experienced industry participant such as CNOOC has entered the market,” Schlegel said.

In the last two years Chesapeake has made multibillion dollar deals with Britain’s BP, Norway’s Statoil and France’s Total for interests in Chesapeake properties in Texas, Oklahoma, Arkansas and the northeastern United States.