Infiltrating Texas’ commerce is part of the Chinese Communist Party’s multi-prong approach to contaminate and weaken the Western world. As part of that plan, Beijing has made serious inroads into the heart of our economic power, raising significant concerns at a time of rising prices of oil and gas.
Previously in this investigative series, Texas Scorecard has explored the Chinese Communist Party’s (CCP) infiltration of Texas’ education apparatus, our land, our politics, and this week our commerce.
In education, they did it using the name of an ancient Chinese philosopher as a trojan horse while promising exports of Chinese culture and language. In land, by acquiring acreage in South Texas near a military installation through companies financed with CCP money, and gaining access to our food supply. And in politics by making connections at the state and local levels, with the promise of greater economic access.
This week, Texas Scorecard is reporting infiltration in our state’s commerce sector by Chinese businesses and corporations with ties to the Chinese Communist Party (CCP). One of those industries is energy.
The state of Texas is well known for its booming energy sector, which explains the high concentration of oil and gas companies in the state. This fact is not lost on the CCP when it encourages Chinese businesses to invest in the United States. In 2014, the Energy and Chemical Industry Committee of the aforementioned China General Chamber of Commerce USA (CGCC), which is tied to the Chinese Communist Party, met to discuss the ins and outs of running Chinese energy companies based in the United States and more specifically, the Houston area (where the Chinese Consulate was located). In attendance were approximately 70 executives from Chinese state-owned energy firms, as well as then-Chinese Consul General Xu Erwen and Commerce Consul Cao Derong.
A number of these firms—most of whom have deep political and financial connections to the Chinese government—have made significant investments in energy projects in the Lone Star State over the past several years.
One of the most notable investors in the Texas energy industry is the CNPC, which stands for the China National Petroleum Corporation. CNPC is a state-owned enterprise, and also happens to be China’s largest producer of oil and gas.
CNPC USA Corporation is a subsidiary of CNPC, and is making moves in the Houston area. In 2017, they began construction on a Research and Innovation Center located in Katy, Texas. For the ten years following that, the projected investment in the R&D center is between $12 million and $15 million. Then-chairman of the Katy Area Economic Development Council, Woody Mann, Jr., welcomed CNPC to the area and lauded the establishment of the R&D center.
However, this project did not mark the end of CNPC’s financial investments in the Houston area.
China National Petroleum Corporation has an 80.25 percent controlling stake in Petrochina Company Limited, which acts as the publicly listed arm of the company. Petrochina signed two agreements with Cheniere Marketing International and Corpus Christi Liquefaction, both subsidiaries of Cheniere Energy headquartered in Houston. Cheniere is the top exporter of American liquified natural gas (LNG). Petrochina agreed to purchase LNG from Cheniere beginning in 2018 and stretching through 2043. These agreements were reportedly expected to support the construction of another train used in the production of LNG at the Cheniere Corpus Christi Liquefaction terminal.
Earlier in 2017, China National Petroleum Corporation had signed a Memorandum of Understanding with Cheniere Energy in the presence of Chinese President Xi Jinping and former President Donald Trump. The MOU promised to establish cooperation between the companies regarding future LNG projects.
Buying Up Oil Fields
CNPC and Petrochina are not the only Chinese state-controlled oil and gas companies involved in the Texas energy sector. The China National Offshore Oil Corporation (CNOOC), which is 100 percent owned by China’s State-owned Assets Supervision and Administration Commission (SASAC), has deep connections to both the Chinese government that sustains it, and the Texas energy industry. CNOOC has received numerous favors from the Chinese central government, including exclusive oil exploration and production rights, subsidies, and tax breaks. China National Offshore Oil Corporation owns a 64.44 percent stake in China National Offshore Oil Corporation Limited, the company which participates in foreign investment.
In 2012, CNOOC Limited agreed to purchase a one-third stake in Chesapeake Energy Corp.’s Eagle Ford shale project, the largest Chinese purchase of an American oil and gas asset at the time. The Eagle Ford shale is located in South Texas, and is used to produce oil and gas. In addition to the purchase, China National Offshore Oil Corporation Limited pledged to cover up to $1.08 billion in “drilling and completion costs” for the project, which is roughly 75 percent of the total share of the cost incurred by Chesapeake. As of 2012, this purchase was the “biggest acquisition of a U.S. oil and gas asset by a Chinese company.”
Another key player in the energy industry in Texas is Sinochem Group Co. Ltd., a subsidiary of Sinochem Holdings Corporation. Sinochem Group operates in the areas of energy, chemicals, agriculture, real estate and finance. Sinochem Holdings is run by the State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC).
In 2013, Sinochem Group Co. Ltd. purchased a 40 percent stake in the Wolfcamp shale field located in Texas. The seller was Pioneer Natural Resources Co., who sold the shares to Sinochem for $1.7 billion. According to a Reuters report on the deal, “Sinochem will pay $500 million in cash and spend $1.2 billion to fund a portion of Pioneer’s future drilling costs.”
The list of foreign buyers when it comes to oil fields in Texas doesn’t end there. Enter the China Petrochemical Corporation, also known as Sinopec. Like all of the other major Chinese oil corporations discussed so far, Sinopec is also wholly owned by the State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC). Sinopec established a research and development center in Houston in 2013, aiming to further explore petrochemical and petroleum engineering research. However, this expansion is not the headline.
Around the same time, Sinopec began investing billions of dollars in oil fields around the United States. In 2012, one of Sinopec’s subsidiaries announced that it was planning to purchase one-third of the interest accumulated by Devon Energy Corporation, based in Oklahoma. The price tag was $2.2 billion. About a year later, Sinopec announced its plan to purchase half of Chesapeake Energy’s oil and gas fields in Oklahoma for $1.02 billion.
Sinopec then turned south towards the great state of Texas. In 2012, the company was in advanced talks with the Texas Clean Energy Project, deliberating on whether to finance the production of a coal gasification plant, which would capture a significant portion of the carbon dioxide emissions released during the coal extraction process. Sinopec would contribute up to $1 billion to the project, which was already slated to receive $450 million in American taxpayer-funded grants from the U.S. Department of Energy. Additionally, the project acquired a contract with the city of San Antonio to purchase all of its electricity for the next twenty-five years.
According to Reuters, Sinopec hopes to adapt the skills, knowledge, and techniques used in these endeavors for future use in their own oil fields in China. It was widely reported Texas Clean Energy Project, then headed by the former mayor of Dallas, signed the deal with Sinopec. The $1 billion Sinopec brought was from the Chinese Communist Party connected Export-Import Bank of China.
Another notable foreign player in the Texas energy industry is a company called Surge Energy, which is based in Houston. Surge is a subsidiary of a Chinese company called Shandong Xinchao Energy, formerly known as Yantai Xinchao. In 2015, Shandong Xinchao Energy made its first investment in the state of Texas: an oil asset composed of 5,000 acres in Crosby County known as Hoople Field.
That same year, Surge acquired another asset, Moss Creek Field, “a 76,000 acre leasehold stretching between northern Howard County and southern Borden County in Texas.” The oil fields were purchased for $1.3 billion through a subsidiary of Ningbo Dingliang Huitong Equity Investment Center, Moss Creek Resources LLC.
But Surge’s expansion didn’t stop there. In 2019, it acquired another 6,000 acres in the area, and roughly 22,000 additional acres were purchased or leased in 2021. According to their website, Surge has “nearly 114,000 net acres located in the energy-rich Permian Basin in West Texas.” In addition to the drilling projects Surge operates on the property, they also invested in water recycling systems for use in completion of their Moss Creek wells.
Based in Beijing, Shandong Xinchao is a company that has won praise from the Chinese Communist Party. A Google translation of a company press release states:
On April 24, 2019, Shandong Xinchao Energy Co., Ltd. became the vice chairman unit of China International Investment Promotion Association (hereinafter referred to as “Investment Promotion Association”), and Chairman Liu Ke served as the vice chairman of the Investment Promotion Association. China Council for the Promotion of International Investment is a national investment promotion agency approved by the State Council, headed by the Ministry of Commerce, registered with the Ministry of Civil Affairs and has the status of an independent legal person.
Since its founding, the Shandang Xinchao-controlled Surge Energy has invested more than $4 billion in the Texas’ energy industry. It doesn’t appear to be slowing down, and has started its own fracking operation into the Texas Legislature. From January 2020 through the end of this year, Shandong Xinchao Energy (through Surge) paid Texas lobbyist Chris Hosek a combined amount between $143,800 and $287,590.
Once a chief of staff for a former chair of the Texas Railroad Commission, Hosek is with the Texas Star Alliance, where he lobbies on behalf of numerous companies with energy interests in Texas. John Pitts, managing partner of Texas Star Alliance, labeled him as “one of the most valuable energy lobbyists in Texas.”
Texas Scorecard reached out to Hosek and offered him a chance to comment. He did not respond before our deadline.
Welcoming the Chinese Communist Party
As previously reported, in recent years a CCP-connected project called Blue Hills Wind has been planning to construct wind turbines in Val Verde County, Texas. J. Kyle Bass, founding member of the Committee on the Present Danger: China, warned this was part of a surveillance operation by the Chinese Communist Party on a nearby U.S. military installation: Laughlin Air Force Base.
The primary company involved in the project is GH America Energy, reportedly a Texas-based company and an indirect subsidiary of Guanghui Energy Company in Shanghai. Another firm called Xinjiang Guanghui Industry Investment (Group) Co. Ltd owns a controlling stake in Guanghui Energy Company. The chairman of Xinjiang Guanghui Industry Investment is Sun Guangxin, who is the richest person in China’s Xinjiang province, and a former officer in the People’s Liberation Army. He owns a 44 percent stake in the Guanghui Energy Company.
Further examination of the Xinjiang Guanghui Industry Investment Group unveils even more startling details. The group has received numerous honors and awards in China, and proudly states the following on their website:
Over the past 30 years, the Guanghui Group has flourished on the wave of the reform and opening up policy. We have been and will continue to be driven by the principle of keeping the Party in mind and obeying the Party’s commands. In the future, Guanghui will take Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era as its guide, thoroughly study and implement the principles of the 19th National Congress of the Communist Party of China, seize the important opportunity of the “Belt and Road” Initiative and comprehensively deepen reform.
An analysis of the Blue Hills Wind project shows the complex corporate family Sun Guangxin runs to facilitate its operations. Brazos Highland Properties LP, another of his companies, was widely reported to have been used to buy about 140,000 acres in Val Verde County, including 15,000 leased to GH America for the wind project. This company is filed with the state of Texas as a foreign limited partnership, with a general partner listed as Brazos Highland GP, LLC. This company has connections with GH America Investments Group, a foreign corporation based in Houston and its president is none other than Sun Guangxin. GH America has another member in this corporate family, GHA Barnett LLC, which is involved in natural gas production in Texas’ Barnett Shale. This company is registered as a foreign limited liability company, with an address in Houston, care of GH America Investments Group.
Many political figures have been questioning the prudence of allowing a company with obvious ties to the Chinese Communist Party access to a key training site and the American power grid. While the Texas Legislature in 2021 passed the Lone Star Infrastructure Protection Act in response to the threat the Blue Hills Wind project posed, Bass has run into problems getting answers as to who is charged with enforcing it.
Also, there is a significant loophole in the law. It is triggered only if the business or government entity knows that the company in question is owned by, or the majority of stock or other ownership interest of the company is held or controlled by, identified hostile foreign powers. Namely, China, Iran, North Korea, or Russia. Not unlike foreign land disclosures with the U.S. Dept. of Agriculture, the onus is on self-reporting.
The act didn’t draw opposition from a single member, including Democrats—perhaps demonstrating that the measure, no matter how well intentioned, did not have any teeth.
As more and more Chinese energy companies – both state-owned and state-influenced – invest their resources in the Texas energy industry, Americans would do well to be guarded and suspicious. These deals are not innocent business transactions; they are well-planned, methodical inroads to access American energy and create yet another foothold for the CCP in the Lone Star State.
In the next installment in this series, Texas Scorecard will examine how, when, and where Chinese companies have entered the realm of real estate.
This article has been updated since publication.
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