A top House Democrat is pressuring the Obama administration to block China’s state-owned oil company from snapping up Nexen’s Gulf of Mexico drilling leases as part of a $15 billion bid to buy the Canadian company.
The Gulf drilling leases currently held by Nexen Inc., would be transferred to China’s CNOOC under the deal. The portfolio includes leases issued under a controversial 17-year-old program that aimed to spur deep-water drilling by waiving royalty payments usually required for oil and gas extracted in federal waters.
Although the 1995 law authorizing that royalty relief said the payments could be required whenever oil and gas volumes rose above certain levels, lease contracts written from 1996 to 2000 did not stipulate the government could suspend royalty waivers if prices jumped.
Some of the affected leases have produced enough oil that they no longer qualify for royalty relief.
But because Nexen’s leases still qualify for royalty waivers, Rep. Ed Markey, D-Mass., said that a deal putting them in Chinese hands “would amount to a subsidy from American taxpayers to the Chinese government.”
In a letter to Interior Secretary Ken Salazar, Markey pressed the administration to block Nexen from transferring to CNOOC its ownership stake in Gulf leases with royalty relief.
“I urge you to exercise the authority provided to you under the Outer Continental Shelf Lands Act to not approve any transfer to CNOOC of Nexen’s ownership stake in leases that do not require the payment of royalties to the American people,” said Markey, the top Democrat on the House Natural Resources Committee.
Foreign oil companies and their U.S. subsidiaries own full or partial stakes in 40 percent of the nearly 150 royalty free leases in the Gulf of Mexico.
“By allowing royalty-free production by these state-owned companies to continue under these leases, American taxpayers are, in effect, being forced to subsidize these foreign governments,” Markey said. “It is unacceptable for these national oil companies, and therefore these foreign governments, to continue to enjoy this ongoing subsidy from the American people.”
According to Markey, foreign companies that own U.S. drilling leases qualifying for royalty relief include:
[ul]
[li]Italy’s ENI, which has full or partial ownership in 28 active leases with royalty waivers.[/li][li]Norway’s Statoil, which has full or partial ownership in 26 leases with royalty waivers.[/li][li]Brazil’s Petrobras, which has a stake in 22 active leases with royalty waivers.[/li][li]Columbia’s Ecopetrol, which has full or partial ownership in three active leases with royalty waivers.[/li][/ul]
inShare1
Tags:[cnooc](http://fuelfix.com/blog/tag/cnooc/), [Ed Markey](http://fuelfix.com/blog/tag/ed-markey/), [Ken Salazar](http://fuelfix.com/blog/tag/ken-salazar/), [nexen](http://fuelfix.com/blog/tag/nexen/), [royalty relief](http://fuelfix.com/blog/tag/royalty-relief/)