The blacklisting of state-run upstream company China National Offshore Oil Corporation by the US government on December 3 has raised the stakes for China’s oil and gas companies amid worsening trade and diplomatic relations between the two countries, S&P Global Platts said in a new report.
China National Offshore Oil Corp. or CNOOC is the country’s largest LNG importer and the Chinese national oil company with the highest percentage of its portfolio located overseas, often in partnership with international oil companies.
This is the case offshore Guyana where CNOOC has a 25 percent stake in the prolific Stabroek block where operator ExxonMobil has found around 9 billion barrels of oil equivalent since 2015.
According to S&P Global Platts, the blacklist, aimed at Chinese companies with links to the country’s military establishment, is also the first time one of China’s big three national oil companies has been directly targeted, the other two being PetroChina and Sinopec.
“So far, the national oil companies have either been on the receiving end of the US-China trade war that disrupted trade flows for oil and gas or were overlooked in earlier versions of the blacklist that named smaller energy companies like Norinco or Sinochem,” the report stated.
CNOOC’s blacklisting was promulgated by an Executive Order from the White House that primarily bars US entities and individuals from making investments in securities issued by the NOC effective January 11, with a deadline of November 21, 2021 to dispose the assets.
“There is no immediate impact on trade flows or US LNG cargoes currently being imported by CNOOC, and companies have not been barred from trading with the NOC,” S&P Global Platts said. “But the risk of China’s NOCs being ensnared in US sanctions should geopolitical relations deteriorate further can no longer be ruled out.”
CNOOC Group’s Hong-Kong listed subsidiary, CNOOC Ltd, in which it has a 64% stake, has seen its shares fall to as low as HK$7.40 on December 4 from HK$9.60 on November 26, after initial reports of the blacklisting in late November and the official announcement on December 3. Shares of China Oilfield Services Ltd or COSL, in which CNOOC Group has a 50.5% stake, also fell sharply.
“The impact on CNOOC’s Corporation’s operations and the broader oil and gas market for China is currently limited. The executive order only prohibits any US persons from dealing in securities of these companies, so the impact may likely only be confined to the share price performance of CNOOC’s subsidiaries – namely CNOOC Limited and COSL,” said Grace Lee, senior oil analyst, S&P Global Platts Analytics.
However, she said the blacklisting could potentially limit CNOOC’s access to financing from US companies. Earlier incidents of blacklisting have impacted both equities and bond markets.
