China Offers Money to Back Oil Companies' Global Buying Spree
Nov. 13 (Bloomberg) -- China's government, facing a surging bill from crude oil imports, said it's planning to offer financial and policy support to help state-owned companies buy reserves and assets abroad to feed increasing domestic demand.
The government may set up a fund to provide oil companies with foreign exchange to buy assets abroad and hedge their investment risks if overseas reserves turn up dry, said the foreign investment director of the country's top planning agency.
It ``has always been our first priority'' to ``encourage companies to invest overseas and participate in overseas resource exploration and cooperation,'' said the National Development and Reform Commission's foreign investment director Kong Linglong, at a Beijing conference today.
China faces increasing fuel shortages as domestic production fails to keep up with an economy that expanded 9.4 percent in the first nine months of this year. The world's most populous nation had the fastest growth rate in oil demand in the past three years, causing world prices to more than triple since 2001 to a record $70.85 a barrel on Aug. 20 in New York.
Asia's second-largest economy imported 45.7 percent of its 2004 crude oil consumption. Oil imports rose 5.7 percent to 110 million metric tons in the first 10 months of this year, increasing 21 percent to 11.25 million tons in October, according to customs figures.
Oil import may increase 5.9 percent this year to 130 million metric tons, said the commission's energy bureau director Xu Dingming. China may import 360 million tons of oil by 2020, with overseas reserves serving 70 percent of the nation's consumption, compared with 60 percent in 2010, according to the State Information Center's China Economic Information Network, which compiles data for the government.
China's Buying Spree
China's three biggest state-owned companies are seeking to buy oil reserves and assets around the world.
China National Petroleum Corp., the nation's biggest oil producer, last month completed a $4.18 billion takeover of Calgary-based PetroKazakhstan Inc., in China's biggest purchase of energy assets.
The acquisition was a victory for China, whose quest for reserves to supply the world's fastest-growing economy had a setback in August, when Cnooc Ltd. scrapped an $18.5 billion bid for Unocal Corp. because of opposition by U.S. lawmakers.
China National Petroleum, parent of overseas-listed PetroChina Co., China Petrochemical Corp. and Cnooc, are continuing to buy oil assets even as oil prices remain high, Kong told Bloomberg News, declining to elaborate.
``We have the chance to buy overseas oil assets only when oil prices are high'' because that is when ``foreign companies like Unocal prefer to sell assets,'' Kong said. ``These companies consider it more profitable to sell assets instead of extracting the oil themselves. We have to seize right opportunity when it arises.''
To contact the reporters for this story:
Yanping Li in Beijing at Yli16@bloomberg.net
Last Updated: November 13, 2005 02:48 EST |
