The fundamental situation and characteristics facing Chinese oil & gas enterprises in overseas M&A

Over the past decade, overseas mergers and acquisitions (M&A) by Chinese oil and gas enterprises have taken place against a backdrop of multiple converging trends: increasingly assertive resource nationalism in host countries; strengthened governmental regulation over oil and gas sectors; frequent state and political intervention; sporadic nationalizations and expropriations; increasingly stringent compliance enforcement; tightening environmental responsibilities; steadily rising oil prices; growing numbers of market participants; and intensifying competition for transactions. The overseas oil and gas M&A landscape is thus characterized by a large number of players, highly complex political and economic environments, substantial legal risks, and strong professional and technical demands—constituting the fundamental situation confronting Chinese oil and gas enterprises as they expand overseas. Overall, Chinese oil and gas enterprises face a situation wherein host countries are tightening control over oil and gas assets, and political and systemic legal risks are escalating. From nationalization measures targeting oil and gas assets in certain South American countries, to widespread legislative revisions across African nations re-regulating their oil and gas industries, to tightening local content requirements and environmental standards in resource-rich countries, to intensified anti-corruption enforcement and sanctions imposed by the U.S., U.K., and EU on specific oil-producing countries—the political and systemic legal risks associated with overseas M&A have grown universally. In many oil-rich countries, domestic political and legal environments remain far from ideal; for Chinese petroleum companies venturing abroad, overseas M&A is often akin to "dancing in chains." Another defining trend is the widespread strengthening of state and political intervention. For instance, when CNPC sought to acquire oil and gas assets in Kazakhstan through an indirect acquisition via a Canadian company, Kazakh law at the time did not grant the Kazakh government a right of first refusal over such corporate transactions. Yet the Kazakh parliament subsequently enacted legislation granting the government a retroactive right of first refusal over any corporate equity transaction involving Kazakh oil and gas assets. Ultimately, CNPC completed the deal only after transferring part of its interest to Kazakhstan’s state-owned oil company. Similarly, in Libya’s Block 47, the government opposed corporate transactions involving its oil and gas assets. Such political intervention is not confined to traditional developing countries—it is also evident in advanced capitalist economies. Beyond CNOOC’s blocked 2005 bid for Unocal in the U.S., Canada issued new guidelines specifically targeting state-owned enterprise (SOE) acquisitions of strategically important Canadian assets following CNOOC’s successful acquisition of Nexen, imposing stricter review standards on SOE purchases of Canadian oil and gas assets. A further notable trend is the enhanced status and growing role of national oil companies (NOCs) in global M&A activity. This elevation manifests in several dimensions: First, NOCs’ overall strength has broadly increased—China’s three major oil companies, Petrobras (Brazil), Petronas (Malaysia), even PTTEP (Thailand), which outbid Shell—one of the traditional “Big Majors”—in the 2012 contest for Cove Energy, and PetroVietnam have all become active participants in the M&A market. This is unsurprising given the long-standing prominence of Middle Eastern NOCs and Africa’s Sonangol (Angola), which won a contract in Iraq’s 2009 bidding round (though it withdrew in 2014 due to security concerns). Second, NOCs have become increasingly proactive in exercising rights of first refusal: several transactions initiated by China’s three major oil companies were derailed post-signing when host-country NOCs invoked such rights, preventing deal completion. Third, NOCs are increasingly collaborating with international oil companies (IOCs) in M&A—not only under traditional host-country production-sharing contracts, but also in deeper, cross-border cooperative ventures. For example, CNPC and Shell jointly established a joint venture to acquire Arrow Energy, an Australian coalbed methane listed company.

Venezuela, Brazil, Guyana, and Argentina: an emerging new group of oil exporters

There is no shortage of heavyweight buyers for any product Venezuela can export. India has signaled its willingness to consider purchasing oil from Venezuela as an alternative to further increasing its imports from the United States. A positive precedent already exists: prior to the U.S. intensifying sanctions against Venezuela under Nicolás Maduro’s rule, India imported approximately 300,000 barrels per day (bpd) of Venezuelan crude in 2019, with Reliance Industries serving as India’s primary buyer. More recently, Indian Oil Corporation emphasized its readiness to receive Venezuelan crude, adding that it is among the few Indian refineries capable of processing this heavy, high-sulfur crude within its system. For years, a hallmark of U.S. diplomatic policy in the Middle East has been positioning India as the principal terminal buyer for oil from countries Washington targets for geopolitical reasons—including during President Trump’s first term. Beyond acting as a key mediator among Arab states to bolster Washington’s influence over them, the U.S. has leveraged such trade relationships to encourage India to serve as a political, economic, and military counterweight to China in the Asia-Pacific region. Just as Washington collaborates with Venezuela, Javier Milei—the Argentine president whom Trump has called his “favorite president”—is expected to see his country benefit from sustained U.S. investment in its oil and gas sector. In October 2025, the U.S. Treasury extended $20 billion in emergency assistance to Argentina, including currency swap arrangements and direct purchases of Argentine sovereign bonds—explicitly designed to support Milei’s pro-market reforms and stabilize Argentina’s economy to attract foreign investment. On February 4, 2026, the two countries signed the “Reciprocal Trade and Investment Agreement,” accelerating U.S. investment in Argentina’s strategic sectors, particularly energy and critical minerals. In light of this, numerous U.S. companies are ramping up oil and gas investment activities—especially in the Vaca Muerta shale formation, whose scale has earned it the moniker “another Permian Basin.” Continental Resources recently acquired non-operating interests in four blocks within the Vaca Muerta basin to accelerate its expansion, while Chevron has positioned Vaca Muerta as a core asset within its global portfolio. Meanwhile, Baker Hughes secured a major order in early 2026 to supply natural gas compression equipment for the San Matías pipeline, supporting natural gas transportation from Vaca Muerta. Overall, Argentina’s daily oil production is projected to reach 1 million barrels in 2026—a 26% increase over 2025 levels. It is safe to say that Brazilian President Luiz Inácio Lula da Silva does not occupy as prominent a position on Trump’s Christmas card list as Argentina’s president does—but Washington cannot ignore Brazil’s strategic importance as one of the BRIC (Brazil, Russia, India, China) emerging-market powerhouses, nor overlook its rapidly growing oil output or its geographic location in America’s “backyard.” To date, Brazil’s daily crude oil production has reached a record 4 million barrels, and total oil-and-gas output—including natural gas—has recently hit a new high of 5.3 million barrels of oil equivalent per day. Industry forecasts indicate that, supported by massive investment programs undertaken by both Petrobras and foreign oil companies, Brazil is likely to rank among the world’s top five oil producers by 2030.

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