Chinese to drill for oil & gas in…Texas – Huh, WTF?

When combined with coal and natural gas, the US has the largest recoverable fossil fuel reserves in the world (more here). Our natural gas reserves alone are enough for decades of energy independence (more here). Yet we import about 60% of our oil from foreign sources (more here).

One of the reasons why is that the largest land owner, the US government, has severely reduced access to both on shore and off shore reserves. Go figure. While we limit our own access to these energy reserves, other countries don’t have a problem – accessing these same reserves. Huh? WTF? (story here)

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 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.

It also might 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 formation that runs largely 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 consulting company in Fredericksburg, Va.

Amid low natural gas prices and a largely difficult drilling climate, she said highly liquid Chinese companies will find willing partners among onshore oil and gas companies hurting for capital to drill.

Methinks there’s something bass-ackwards with this. Shouldn’t we be recovering this oil and using it to reduce our dependency on foreign sources? Just wondering…

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