China's race for energy resources only just heating up

By Benjamin Morgan
AFP
SHANGHAI
Petroleumworld.com 01 11 06

China's 2.3-billion-dollar Nigerian oil venture is a major step forward for the energy ravenous country as it seeks to power its fast-growing economy but analysts said Tuesday the race was just heating up.

China National Overseas Oil Corp (CNOOC)'s purchase of a 45 percent stake in the Akpo field off the West African nation is the biggest overseas investment by Beijing since China National Petroleum Corp's (CNPC) took over central Asia's PetroKazakhstan Inc for 4.18 billion dollars in October.

That deal was the largest ever by a Chinese corporation and added to a small but growing list of successes around the globe as China desperately seeks fuel for its economy.

India and China, often fierce rivals in the race for global energy resources, last month won a joint bid to buy Petro-Canada's 37-percent stake in Syria's Al Furat oil fields for 573 million dollars.

The acquisition by CNPC and India's Oil and Natural Gas Corp marked the first time the two Asian giants had bid together for overseas reserves to feed their oil-hungry economies and opened the way for further collaboration.

Meanwhile, China remains expectant as Russia builds a trans-Siberian pipeline capable of delivering 80 millions tons of oil a year, even though Japan looks to be the front-runner for getting first access to it.

CNOOC's announcement on Monday that it had secured the stake in Nigeria's Akpo field came after the company's spectacular failure last year to buy US company Unocal Corp for 18.5 billion dollars.

"Last time, the failure on the purchase of Unocal had a big impact on the companys expansion strategy," said He Jun, an analyst at Beijing-based energy consultancy group Anbound.

While the Nigeria deal pales next to the Unocal bid, CNOOC chief Fu Chengyu said the transaction was important in the company's global expansion plans.

"(The deal is) perfectly aligned with CNOOCs long term strategy of achieving growth through the exploration and development of offshore fields and achieving geographic diversification of the companys portfolio," Fu said.

Analysts too praised the deal and CNOOC's acquisitive bravado, but warned -- as occurred in Washington with Unocal -- that politics in Nigeria could trump money.

"The transaction is a big positive for CNOOC because it will mean a more-than 15 percent increase in its daily oil production and ensure its growth in the future," said Stephen Yuan, an analyst at Sun Hung Kai Financial Group in Hong Kong.

"In spite of the positives, I'm concerned about the political and cultural risks that CNOOC is taking. It doesn't have any experience operating in Africa and it's unclear what preparations it has taken for managing and overcoming these risks."

Yet murky political environments have rarely bothered China which has repeatedly shown its willingness to do business first and not ask questions later.

Just as with Western energy companies, the realpolitik approach has often served China well and Anbound's He said the free-wheeling atmosphere in Africa was a benefit to China.

"This kind of (political) instability and lack of transparency, on the contrary, provides greater space for cooperation between governments," He said.

Regardless of ethical considerations, China has no choice but to secure more energy as the world's most populous nation continues its near double-digit economic growth.

China, already the world's biggest consumer of oil after the United States, became a net importer in 1993.

"I think that is one of the main concerns, how do we (China) expand our assets," said Scott Weaver, an analysts at Macquarie.

In another example of the geopolitical concerns for China as it seeks more energy resources, the nation remains locked in a bitter argument with Japan over disputed claims to gas reserves in the East China Sea.

AFP 01/10/06

Copyright © 2006 AFP. All rights reserved

 

 

Send this story to a friend

Your feedback is important to us!

We invite all our readers to share with us
their views and comments about this article.

Write to editor@petroleumworld.com

Any question or suggestions, please write to:
editor@petroleumworld.com

Best Viewed with IE 5.01+
Windows NT 4.0, '95, '98 and ME +/ 800x600 pixels