A very intriguing post on the Xun forum by Fischer

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Hi everyone,

I was up doing some research on the oil and gas industry last night and came across an interesting trend.

Recently, Chinese companies have been buying up oil and gas fields and creating ventures with American oil companies to invest in American oil and gas drilling. In fact, according to the U. S. Energy Information Administration, $5.5 billion have been invested by Chinese companies through joint venture deals in “U. S. tight oil and shale gas” (1). China has been investing aggressively in the United States recently. In 2011, “Chinese firms completed US deals worth $6.5 billion” (includes all industries, not limited to oil and gas). This was increased from 2010, in which deals totaled $5.8 billion (7). Also, “Chinese companies concluded 8 mergers and acquisitions and nine greenfield investments in the U.S. in the first quarter worth a total of $2.2 billion” (7)!

The reasoning behind the investments in the oil and gas field is not only return on investment when oil prices begin to climb, but also they are hoping to get access to some of the technology, mainly fracking technology (1). The foreign investments seem to focus in on Texas. The focus is on Texas oil and gas wells because the Eagle Ford Shale has “hard to access shale rock formations (6)” a characteristic similar to China’s shale. China has twice the shale gas as the United States, but it is hard to reach shale gas due to a “combination of challenging geology and an unflexible industry structure” (1). They are looking to invest in current plays in the United States to learn and acquire the technology that will allow them to drill their own oil and gas, as well as form relationships with oil and gas companies to help them use said technology in China’s shale (1). Currently, North America is China’s top region for oil and gas deals (10). Chinese companies are looking to create joint ventures with smaller oil and gas companies, not the major players such as Exxon Mobil (1). Reason being, it becomes a win-win for Chinese and American companies. Quoted from Aloulou Fawzi, an EIA energy economist, “Foreign companies, especially in Asia, are learning the techniques, while U.S. oil and gas companies without deep pockets can solve some of their financial issues.” (1)

The U. S Government is welcoming the foreign investment from China (9). In fact, in 2012, the Chamber of Commerce released a publication on Faces of Chinese Investment In the United States seen here:

https://www.uschamber.co...eInvest_copyright_lr.pdf

Quoted from the publication: “The U.S. Chamber of Commerce is committed to increasing two-way foreign direct investment (FDI)between the United States and China. We believe that it can yield significantly increased benefits to both countries.”

And

“While obstacles remain, the potential for continued U.S. FDI in China remains bright. To help promote greater Chinese investment in the United States, the U.S. Chamber is releasing this important publication. Faces of Chinese Investment in the United States helps demystify the U.S. investment climate for Chinese business leaders who are interested in the American market. This report contains concrete and practical information, not theoretical explanations or reams of statistics. The advice in this report comes from the chairmen, CEOs, and other top executives of Chinese companies who have already been successful in the United States.”

China currently consumes about 10 million barrels of oil a day and oil demand in China is expected to jump 50% by 2020 ( . It is speculated that the economy of China, and India is mentioned, can support a rise in oil prices due to the increasing demand (9). In fact, “The International Energy Agency estimates that China also could become the world's largest consumer of oil, thanks to the affinity of its growing middle class for cars.” (10)

Below are the links to articles I sited in this discussion. It is a very interesting trend happening in the oil and gas industry, and something that XNRG can potentially slide into due to the nature of their business and the joint venture in Hong Kong.

1. http://www.bloomberg.com/bw/articles/2013-04-...shale-boom
2. http://www.paulsoninstitute.org/blog/2014/12/...nvestment/
3. http://www.china-invests.net/20150121/35581.aspx
4. https://www.uschamber.com/sites/default/files...ght_lr.pdf
5. https://texaswideopenforbusiness.com/sites/de...stment.pdf
6. www.defenddemocracy.org/media-hit/texans-uneasy-over-chinese-oil-investment-in-lone-star-state/
7. http://www.forbes.com/sites/kenrapoza/2013/05...-american/
8. http://money.cnn.com/2012/05/29/investing/china-oil-energy/
9. http://usa.chinadaily.com.cn/us/2015-01/21/co...363232.htm
10. http://www.wsj.com/articles/SB100014240529702...3067806776
11. http://www.wsj.com/articles/SB100008723963904...2360345550
12. http://www.wantchinatimes.com/news-subclass-c...p;cid=1102

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