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U.S. To Blacklist Chinese Oil Giant Due To Military Ties

The United States government is set to add Chinese state oil company CNOOC to a blacklist of companies with ties to the Chinese military, Reuters has reported, citing sources and a document.

The move is the latest escalation in the U.S-Chinese trade spat and comes less than two months before the administration changes. So far, the Department of Defense has designated 31 Chinese companies from various industries as either owned or controlled by the country’s military. Earlier this month, Reuters reported the DoD will add another four. CNOOC and a Chinese chipmaker are two of these, along with a construction company and an engineering consulting firm.

The implications for the companies appear to be loss of access to U.S. investors: Reuters cited an executive order by President Donald Trump that will ban U.S. investors from buying stock in the blacklisted companies.

Shares in CNOOC took a 10-percent dive on the news, according to a report by the South China Morning Post. This was the stock’s most significant decline since early March. Fellow state giants PetroChina and Sinopec also declined in Hong Kong trade today.

Related: This Just Became The World's Largest Gas Hub

CNOOC is China’s biggest offshore exploration company and the only one among the state oil giants that is purely focused on exploration and production. According to a recent investment analysis published in Yahoo Finance, CNOOC is a lucrative investment opportunity because it holds a monopoly over offshore exploration through a number of production sharing contracts. Also, CNOOC boasts some of the lowest all-in costs in the world.

This opportunity will not be available to U.S. investors beginning next year, apparently, cutting off a source of fresh money for the Chinese company. According to U.S. experts, however, the impact on CNOOC or any other Chinese company blacklisted will be mild because its scope was too limited to do any real harm.

By Charles Kennedy for Oilprice.com

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