Heads up, upstream players! Non-North American oil and gas companies are increasingly competing with U.S. independents for domestic oil and gas reserves-and winning. And more deals for U.S. assets by non-North American buyers are under way, various sources report.

Buyers include Spain's Repsol, Norway's Statoil, Australia's BHP and several Japanese firms. "I think we're going to continue to see this trend," one asset-marketer says.

The trend to date has been limited to Gulf of Mexico reserves and production. In the past two years, non-North American companies' winning interest has been only for these assets, both in shallow and deep water. They collected titles to some $11.5 billion worth of these properties since January 2005, according to data from asset-marketer Scotia Waterous.

None of the winning bidders for onshore U.S. upstream assets during the timeframe were non-North American, except for long-time U.S. upstream players Shell and BP.

Also interesting is that entirely absent from the field of U.S. asset buyers are "The Five:" Chinese oil companies CNOOC, Sinopec and PetroChina, India's ONGC and Indonesia's Petronas. This is despite their aggressive search for reserves elsewhere on the globe.

CNOOC was pushed out of a deal to buy U.S.-based Unocal Inc. two years ago, after Congress and other American leaders raised red flags about Chinese ownership of American resources. Meanwhile, other foreign oil companies have done 14 deals for Gulf of Mexico resources since then and prompted no alerts.

One asset buyer said at the time that China's free-market competition for U.S. resources is particularly unfair, when free-market access to China's resources is not reciprocal. "I would ask...how many American major or independent oil companies have significant acreage or production onshore China? I would also like to know how long American companies have been trying to make that happen."

Simeon Kriesberg, an attorney with Mayer, Brown, Rowe & Maw in Washington, says there are no U.S. prohibitions on foreign ownership of domestic oil and gas reserves. There are national security restrictions on foreign ownership of other types of energy assets, such as refineries, he adds.

Meanwhile, The Five have been leading bidders in Australia, Sudan, Egypt, Asia (outside their home boundaries) and Angola, according to research and consulting firm Wood Mackenzie. One has taken an interest in Canada's oil sands. Yet, none appears in the "buyer" column in any U.S. asset or corporate transaction.

Price could be a factor. Those non-North American producers that have won U.S. reserves have paid well for their holdings-averaging $3.21 per thousand cubic feet equivalent (Mcfe) of proved reserves, according to the Scotia Waterous data.

WoodMac says CNOOC et al. actually aren't bidding for resources around the globe as fiercely as sellers would think. In an analysis of 25 significant overseas deals (in which the assets are outside the buyer's home country), only five were won by one of The Five. The study period was April 2004 to April 2006.

Meanwhile, a WoodMac analysis of 13 overseas deals for which The Five did take title carried expected rates of return of at least 12% in most cases at closing. (For more on their overseas acquisitions, see "Asian NOCs," Oil and Gas Investor, August 2006.)

Another notable difference in the profiles of overseas buyers of U.S. reserves and The Five is that the former are publicly held companies and do not have the kind of government backing The Five carry.

CNOOC et al. are likely to appear in U.S. upstream transaction headlines again. How will Congress answer then?



Non-North American Buyers' Deals

For U.S. Reserves, 2005 to March 2007*

Buyer/HQ/ProvedAsset Location

Itochu Corp./Japan$3.87GOM Shelf

Petrobras/BrazilNAGOM Deepwater

Repsol/Spain; BHP/AustraliaNAGOM Deepwater

Statoil/NorwayNAGOM Deepwater

Statoil/NorwayNAGOM Deepwater

Repsol/Spain$3.13GOM Deepwater

Mitsui/Japan$3.50GOM Shelf

Norsk Hydro/Norway; Nippon/Japan$3.17GOM Shelf

Marubeni Corp./JapanNAGOM Deepwater

Total/France$3.54GOM Deepwater

Woodside/Australia$3.81GOM Shelf

Statoil/Norway$3.24GOM Deepwater

Nippon/Japan$2.36GOM Shelf

Sumitomo/Japan$2.06GOM Shelf

Mean$3.07

Mean** $3.10

Median$3.21

*Some deals included a U.S. partner in the purchase.

**Excluding high and low. Excludes acquisitions by Royal Dutch Shell and BP Plc. Source: Scotia Waterous