Tags: China | oil | gas | acquisition

CNNMoney: China Is on the Prowl for the World's Oil and Gas

Friday, 01 Nov 2013 08:44 AM

By John Morgan

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China is on an oil-and-gas-buying binge, with most of the country's largest acquisitions this year targeting the energy sector.

Analysts believe China's energy fixation can be attributed to its move away from coal, as well as domestic production shortages, CNNMoney reported.

If the acquisitions have gone unnoticed in the United States, it may be because the Chinese have avoided big U.S. purchases since being rebuffed in their state-owned $18 billion bid to purchase California-based Unocal in 2005.

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Dealogic estimated that of the 10 largest mergers and acquisitions by Chinese companies in 2013, seven have been energy plays.

Among the blockbuster deals have been $10 billion state-sponsored investments in oil and gas fields in Mozambique and Kazakhstan, plus a $3.1 billion minority stake in Apache Corp.'s Egyptian fields, CNNMoney noted.

In places like Iraq, where Exxon Mobil and others have shied away from energy deals because of poor terms, Chinese oil companies have been willing to pay royalties, taxes and other fees that add up to 90 percent or more of the profits.

China, the most populous country with 1.3 billion citizens, is the second largest oil consumer after the United States — and by some accounts may already be the largest consumer — and is expected to soon overtake the United States as the largest importer as well.

"The country is also rapidly urbanizing, with hundreds of millions of Chinese moving from rural areas to the cities," CNNMoney said. "China is also adding millions of cars to the roads each year, a trend that only adds to demand for oil-based products."

The Wall Street Journal reported recently Chinese state-controlled oil companies will be limited to joint bids to develop Brazil's largest offshore oil discovery, the huge Libra prospect deep in the Atlantic Ocean.

The Journal said it appeared national oil companies -- especially those from Asia – appeared to be more focused on securing oil reserves than turning profits in the Libra bidding.

"In the future, anything that destabilizes the oil market will increasingly harm China more than the United States. While Beijing views this increased import reliance as a strategic weakness, it a boon for those hoping to see Beijing grow into its role as a global leader," The Christian Science Monitor predicted.

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