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A woman waits in the lobby of the China National Offshore Oil Corp. (CNOOC) building in Shanghai.


CNOOC Ltd.'s quest to be a world player is reflected in its stylish headquarters in eastern Beijing.

Designed by a U.S. architect to resemble the prow of a ship, its striking outline is lit up each night against the city's hazy, fast-changing skyline, a modern silhouette built ahead of the 2008 Beijing Olympics to showcase the company's growing status.

But as CNOOC Ltd., the publicly listed arm of state-owned China National Offshore Oil Corp., seeks Canadian government approval for its $15.1-billion (U.S.) bid to take over Calgary's Nexen Inc., its public persona is a jumble of contrasts.

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On one hand, CNOOC is a fast-growing energy company competing with the world's biggest. But it is also a strategic extension of the Chinese government, which must ensure energy security for the fast-growing country.

CNOOC was born in 1982 as the offshore oil arm of China's Ministry of Petroleum. In the late 1980s, it became a state-owned company, along with Sinopec and China National Petroleum Corp. (the parent of PetroChina), as the ministry was broken up. China National Offshore now has a 64.45-per-cent stake in CNOOC Ltd., which trades in Hong Kong.

Although they are rivals, all three state-owned oil firms are interconnected through their government and Communist Party masters. The head of each of China's big oil companies is appointed by the organization department of the Communist Party.

As chairman of CNOOC Group and CNOOC Ltd., Wang Yilin is also the company's Communist Party secretary, a position said to be the equivalent of a vice-ministerial post in the party.

"With the Chinese oil companies, a lot of the people who take these positions often aspire to a higher position in the party structure," said Erica Downs, a fellow with the Brookings Institution who has examined China's oil companies closely.

"That means they have to make sure the corporate interests align with the national ones," she said.

CNOOC "is serving China's national interest, there is no two ways about it," agreed Laban Yu, senior vice-president and head of oil for Jefferies research and investment group. As an example, he cited CNOOC's 2011 year-end results showing $9.5-billion in cash.

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"You're never going to see a North American [exploration and production companies] in a net cash position because it just means they are hoarding money from shareholders," Mr. Yu said.

"The government's goal for these three oil companies – PetroChina, Sinopec and CNOOC – is to provide oil and gas for China's future … Their growth targets are political targets; they're not based on the quality of the resources," he said.

Those who have worked directly with CNOOC say it operates internally much as any other company, though there are political imprints. There are "occasional" signs of state bosses, including required propaganda reading praising the economic vision of President Hu Jintao, said one China-based senior lawyer who works regularly with Chinese oil companies. "But no one pays any attention to that. They're too busy doing business," the lawyer said.

In an e-mailed response to an interview request, CNOOC said the company strives "to maintain sound corporate governance practices, abide by commercial and ethical principles and run a corporation defined by excellence, integrity and accountability."

There are questions around CNOOC's human rights record. It has contributed millions of yuan toward resettling nomads on the Tibetan plateau, a government-driven program which human rights activists say is a forced resettlement reminiscent of Canada's approach to its native peoples in the last century. The policy has contributed to unrest, the imposition of martial law and nearly 60 self-immolations by Tibetans.

However, some of CNOOC's business partners describe the company as conscientious.

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"We've found them excellent partners, really good partners. For us it has been a learning experience, and it has been for them too," said Rob Crook, chief executive officer of Australia's Exoma Energy, in a telephone interview from Brisbane.

He added that his Chinese counterparts have been sensitive to community and social issues in their 50-50 joint ventures in gas exploration.

"It is self-evident, you are dealing with the Chinese government …But they work in a commercial way and CNOOC in particular is very understanding of that," Mr. Crook said. "They're not going to be a 400-pound gorilla smashing around in Canada laying down the law. They don't work like that."

In Australia, however, almost all Chinese natural-resource interests are minority stakes or joint ventures (unlike the proposed Nexen deal).

Chinalco's high-profile attempt to increase its stake in Australia's Rio Tinto three years ago was abandoned in the midst of heavy political pressure, and even CNOOC's recent move to acquire up to 19.9 per cent of Exoma Energy needed approval from Australia's Foreign Investment Review Board.

"This isn't done mutually. The Chinese aren't working in the other way [allowing investments in]," said Bruce Jacobs, professor of Chinese studies at Monash University in Melbourne, speaking of the need for caution in reviewing Chinese investments. "I wonder if you Canadians are a bit naive about this."

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CNOOC is not the government of China, said Han Hua, executive director of a joint research centre between China's CNPC and the province of Alberta, but the company and its parent remain in the business of furthering China's interests, he acknowledged.

"If these state-owned companies have some government function, it's because these companies show some responsibility for safeguarding the national energy security," Mr. Han said. CNOOC helps "to guarantee the security of a safe [energy] supply, because the Chinese economy is developing so fast."

Special to The Globe and Mail

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