National oil companies have popped up in a significant number of mergers and acquisitions in the oil patch in recent years, and have led in joint venture partnerships.Flush with cash and in search of resources, Chinese companies have consistently remained in the headlines, but the biggest deal last year involved Russia’s Rosneft.

“In 2012, National Oil Companies (NOCs) were involved as buyers in the two largest deals in the oil and gas industry. Both deals came in the fourth quarter and helped push the total value of all oil and gas deals in 2012 to more than $402 billion, a 19% increase on the total a year earlier,” Dale Nijoka, Ernst & Young Global Oil & Gas Leader wrote in “National Oil Company Monitor Q4 2012,” a corporate publication. The largest deal was Rosneft’s $61 billion cash and shares acquisition of TNK-BP and the second biggest deal was China National Offshore Oil Company’s $15.1 billion Nexen takeover.

At the same time, joint ventures have been the preferred strategy for foreign companies looking to access US shale plays. “In early 2013, Sinochem, a Chinese company, entered into a $1.7 billion joint venture with Pioneer Natural Resources to acquire a stake in the Wolfcamp Shale play in West Texas. This investment highlights a renewed trend toward foreign joint ventures. Since 2008, foreign companies have entered into 21 joint ventures with U.S. acreage holders and operators, investing more than $26 billion in tight oil and shale gas plays,” according to the EIA’s “Today in Energy” brief for April 8th.

“Investment in shale plays in the United States totaled $133.7 billion between 2008 and 2012, as part of 73 deals. Joint ventures by foreign companies accounted for 20% of these investments,” said the EIA. Most of the deals involve up-front cash investments with agreements to cover a portion of future drilling costs for a specified time period. This structure works well for both parties because US operators squeezed by low natural gas prices in recent years have needed cash to finance hold by production requirements in dry gas areas – among other things – and foreign companies benefit from operational expertise and technology transfer.

Following the Nexen deal and the acquisition of Canada’s Progress Energy by Malaysian NOC Petronas, outright ownership of Canadian energy firms may be more challenging going forward, according to Ernst & Young, which could lead to a greater proliferation of JV deals like we’ve seen in the US.

The growth of the JV phenomenon in the US was sparked by CNOOC’s highly controversial bid to acquire Unocal that failed in 2005. Unocal (formerly Union Oil Company of California) was viewed as a strategic asset and its falling into Chinese hands was unacceptable to many politicians, pundits and members of the public. As such, JV deals and other “strategic partnerships” became the preferred method for NOCs seeking access to domestic US oil and gas markets, a trend that may now accelerate north of the border as well.