The $15.1 billion bid by CNOOC Ltd. for the Canadian energy company Nexen Inc. is currently under investigation by the Canadian government who said that it would review the bid by CNOOC based on pertinent foreign investment laws, at the same time questions have arisesen as to whether Nexen is even worth of that much.

“To buy an oil company is to buy its oil reserves. Nexen has 2bn barrels of proven and probable(2P) reserves, which means the cost per barrel is as high as $9 to $10. It’s really not a bargain compared with prices of current global oil resource acquisitions.” said an expert.

The Nexen deal, as reported by The Financial Times , raises CNOOC’s bragging rights with its rival Sinopec. Yet the latter paid a mere $1.5bn for a 49 per cent stake in the UK North Sea assets of fellow Canadian energy group Talisman, which works out to an approximate cost of $6.4 per barrel of 2P reserves.

Cnooc's $27.50-a-share cash offer represents a 66 per cent premium on Nexen's 20-day weighted average share price. That may be too high to flush out a rival offer. CNOOC, however, would additionally have to cover the $4.3 debt Nexen bears if the deal is finalized, which brings the total acquisition cost to nearly $20 bn.

But the huge cost might not be the most difficult issue for a Chinese state-owned oil giant, with mining technology potentially turning out to be more troublesome. The resources Nexen owns, including oil sands, shale gas, and deep-sea resources are all unconventional resources which require high-tech mining equipment and techniques. The main goal going forward, assuming the deal goes through, should be to focus on management and technical teams.