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The New York Times reports that the recent flurry of deal-making in the energy sector is mainly a result of a global race that is centered on locking up resources.
With 87 percent of the world’s oil reserves controlled by foreign governments or national champions, big private energy companies are finding it harder to replace lost production.
To make matters even more difficult for publicly traded companies competing in open market economies, the big driver on the mergers and acquisitions stage is no longer major energy companies like Exxon Mobil, BP, or Total. It’s China.
Merger advisers also owe a debt of gratitude to China, which is trying to feed surging domestic demand for energy, according to the publication. Acquisitions by Chinese national oil companies made up nearly 40 percent of the value of deals outside the United States in the first quarter of the year, according to IHS Herold. Bidding pressure from deep-pocketed Chinese companies — including Sinopec’s purchase of a piece of Conoco’s business in Canada’s oil sands this week — pushes up the value of deals.
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