Wednesday, November 20, 2013

Nexen vs. Unocal: Why it's different for CNOOC this time around

Written by Aveek Sarker, Student Fellow at the Carl Vinson Institute of Government

In July of last year, the Chinese National Offshore Oil Corp. (CNOOC), China's largest offshore oil and natural gas explorer, announced that it had agreed to pay $15.1 billion in cash to acquire Canada's Nexen Inc. in what would amount to the largest foreign takeover by a Chinese company to date. This announcement brought to memory the company's failed $19 billion bid for a California-based petroleum exporter, Unocal Corp., in 2005.

While CNOOC has learned a great deal since Unocal, there are a number of fundamental differences between the two deals that warrant consideration. In its 2005 bid CNOOC was competing with Chevron Corp., a U.S. company, for control of Unocal, while the bid for Nexen was a negotiated deal that was uncontested and had the full support of the company's board of directors. CNOOC had additionally gone out of its way to reassure management and the Canadian government that Nexen would remain a Canadian company. CNOOC stated its plans to list its stock in Toronto, retain Nexen's existing employees, and make Calgary its North American headquarters. Furthermore, the Nexen transaction involves a company from a "consuming" country (China) purchasing a company from a "supplier" country (Canada). In contrast, Unocal involved a company from a "consuming" country (China) purchasing a company in another "consuming" country, in this case the United States.

In the case of Nexen, the interests of the two countries involved can easily be seen as aligned, while it's much more difficult to see alignment in the Unocal deal. In Unocal, the countries represented by the companies involved are in direct competition for access to petroleum reserves. The leadership of large consumption-based economies such as the United States and China are understandably concerned about their country's ability to have continued access to the natural resources needed to support their growing markets and industries. Supplier countries like Canada have large reserves of natural resources but relatively smaller populations and economies. They are thus most concerned about finding long-term, stable markets for their products. Developing and selling more of their natural resources is their preferred model for development.

Canada has the world's third largest oil reserves - more than 170 billion barrels - after Saudi Arabia and Venezuela. Daily productino of 1.5 million barrels from the country's oil sands is expected to increase to 3.7 million by 2025. Finding a reliable market for this output is one of Canada's key concerns, and developing China as a long-term investor is a prime objective.

Moreove, CNOOC has an incentive, as well as the financial wherewithal, to accelerate development of the oil sands as well as Nexen's Canadian shale gas prospects, boosting investment and tax revenues in the country. In this context, it's easy to understand why the Nexen deal was approved.

Tuesday, November 19, 2013

Get moving: the impact of walkable cities

Written by Caley Trujillo, Student Fellow at the Carl Vinson Institute of Government

Throughout the past month at the Carl Vinson Institute I have been heavily involved in research and writing revolving around the planning concept known as walkability. My faculty mentor, Chrissy Marlowe, first introduced me to this smart growth principle during a planning and zoning course she taught. At the end of the training course she challenged the planning commissioners and city staffers who attended to plan with the future in mind and think about the quality of life they hope to achieve for their communities.

Walkability is the extent to which an environment is built to encourage pedestrian activity, expand transportation options and have safe and inviting streets. This can mean building more bike lanes, walking trails or sidewalks. It can also entail creating mass transportation such as subways and bus lines. Walkability offers surprising benefits to people's health, finances and communities. For example, people who live in the least walkable neighborhoods are about one-third more likely to be obese than residents of neighborhoods that best support foot traffic; citizens' quality of life can be enhanced by building well-designed, compact communities.

Growing up in metro Atlanta I could related to the need for more smart growth principles to be implemented in my city. Growing up in a car-dependent community, my parents fought traffic to and from work every day, spent less time at home and were physically put at risk due to the lack of daily exercise.

I took this opportunity as a Fellow to learn more about walkability. To familiarize myself with this concept, I began by reading "Walkable City: How Downtown Can Save America," by city planner Jeff Speck. This book opened my eyes to all the cities that have already started implementing walkable principles such as Washington, D.C. and Portland, Ore.

Based on my research, I expect to draft a paper about the role that planning walkable neighborhoods could play on the state of Georgia's economic, physical and community growth. Through development of downtown spaces and "rightsizing" streets, Georgia can help meet the new market demand of walkable urbanism and revitalize local communities. Some metro Atlanta cities such as Woodstock, Sandy Springs and Roswell are already laying the groundwork for this new type of development. My research is still in the beginning stages, but my hope is to provide new insight on how planning walkable communities can make a positive impact on Georgia.