China oil giants' overseas buying spree loses steam

Outbound acquisitions by the mainland's state-owned oil and gas majors have fallen after a buying spree over the past few years, and officials are cautious on doing deals amid a protracted anti-corruption campaign by the central authorities in Beijing.

But asset purchases by smaller state-owned firms and private companies have increased as they seek to diversify into the sector that still provides good cash-flows despite profits being slashed by lower oil prices and rising expenses from exploration and operating costs.

Smaller operators are seen by some as potential beneficiaries of measures announced by Beijing last month to smooth procedures for overseas investments.

The measures, which came into effect last week, allow domestic firms to invest overseas without prior approval, although they must first register their investment with the authorities. A potential snag for energy companies is that investments in industries or countries deemed sensitive will still require approval.

Herbert Smith Freehills partner, Hilary Lau, said the new rules would facilitate deal flows, especially for small and medium-sized enterprises, but judgment on the sensitivity of an energy-sector deal would likely be decided on a case by case basis.

"Generally, the initiative to stimulate deals and speed up the approval process is definitely a positive one and is in line with China's efforts to encourage deal flows over the past year," Lau said.