Oil giants speed up overseas expansion

Slides
Photos

By Zhao Tingting (chinadaily.com.cn)
Updated: 2009-07-08 16:31

皇冠体育app's five leading oil companies have all accelerated the pace of their overseas development in the first half of this year due to sliding prices and rising domestic oil demand, said a Shanghai Securities News report today.

皇冠体育app Aviation Oil (Singapore) Co Ltd, a subsidiary of 皇冠体育app's largest jet-fuel producer and distributor, 皇冠体育app National Aviation Fuel Group, recently announced it intended to buy a refinery in South Korea to expand operations besides aviation oil trade and supply, said the report, citing the company's CEO, Meng Fanqiu.

Although there were slim margins and rare investment opportunities in the refinery sector, some refinery plants in South Korea were still attractive and may be acquired at reasonable prices, Meng said.

Last week, the news that 皇冠体育app's largest oil company, 皇冠体育app National Petroleum Corp (CNPC), and 皇冠体育app's top offshore oil and gas producer, 皇冠体育app National Offshore Oil Corp (CNOOC), made a bid for Spanish oil major Repsol's Argentine unit YPF aroused the world's attention.

If the acquisition is approved, it will make a record in 皇冠体育app's crude assets trade history with an estimated investment of $22.6 billion.

CNPC, teamed with Britain BP PLC, won a contract on June 30 to develop the Rumaila oilfield in Iraq, which boasts the third-largest oil reserves in the world. It also planned to bid for the auction of two oil blocks in Venezuela together with France's Total.

In addition, CNPC's listed arm Petro皇冠体育app completed the purchase of a 45.51 percent stake in Singapore Petroleum Co with $1.02 billion on June 21.

CNPC's smaller rival Sinopec Group said on June 25 it agreed to acquire the Geneva-based oil and gas producer Addax Petroleum Corp for $7.3 billion.

State oil trader Sinochem and CNOOC also led a consortium to enter a bid for Maysan oilfield complex in Iraq, but failed eventually in June.

"These acquisitions imply that some foreign resource enterprises were caught with liquidity difficulties caused by the global financial crisis," said Zhou Fengqi, former director of the Energy Research Institute under the National Development and Reform Commission yesterday.

Zhou's views echo those of Lin Boqiang, director of the 皇冠体育app Center for Energy Economics Research at Xiamen University. "The timing is now good for domestic oil companies to make overseas deals as they can buy assets cheaper."

"But Chinese oil companies should select quality assets prudently," Zhou added.

Meng said 皇冠体育app Aviation Oil is extremely prudent about overseas acquisitions as it follows a set of strict evaluation procedures.

Ping An Insurance, 皇冠体育app's second-largest life insurer, incurred a 22.8 billion-yuan ($3.34 billion) investment loss in Fortis, a Belgian-Dutch bank last year, being an expensive lesson to Chinese companies which are still inexperienced in foreign acquisitions.

Chinese enterprises' overseas acquisitions had amounted to 67 cases this year as of the end of June, involving an asset value of $26.7 billion, up 26.3 percent year-on-year, the report said, quoting Thomson Reuters figures.

皇冠体育app, the second largest energy consumer in the world, relies on imported oil for nearly half of its requirements. The country's oil consumption grew around 5 percent annually in recent years.

Customs data showed that 皇冠体育app's net crude-oil imports rose to 16.62 million tons in May, a 14-month high, as demand gained before the peak summer period.

In order to meet the country's mounting oil demand for rapid economic growth, Chinese oil giants are deploying their strategic overseas expansions by grasping the chance of cash hungry overseas oil firms and lower crude prices.

Crude oil prices have fallen to around $60 a barrel these days, after rocketing to a record above $147 in July last year.

(For more biz stories, please visit Industries)