Energy investing benefits world
Updated: 2012-04-03 08:19
By Zhou Yan in Boao, Hainan (China Daily)
Adviser says exploration overseas follows regulations
China's exploration for energy and other natural resources overseas is conducted in strict adherence to international trade rules and is good for the world because it contributes to the supply of natural resources, said Zhang Guobao, chairman of the Advisory Board of the National Energy Commission.
The amount of money China invests in foreign energy resources has been increasing in recent years amid the country's economic growth, Zhang said at an energy forum that was taking place as part of the Boao Forum for Asia. Even so, it has done far less in that way than its Western counterparts, which started on similar endeavors more than a century ago, he said.
Zhang, who stepped down as head of the National Energy Administration on January 2011, said Chinese companies are discriminated against when they invest overseas, even though they do business in a transparent way and obtain projects through public bidding.
"It's a matter of bias perception," he said.
Zhang said China, like other countries, follows international commercial rules when it deals with natural resources that have been tapped overseas.
Generally, China takes crude oil that has been collected overseas and sells it in the global market, and then uses money obtained from those sales to buy oil in the international market for domestic use, he said.
China's three biggest oil companies made $20 billion worth of foreign mergers and acquisitions in 2011, the second-highest record set for such transactions, according to a report from the research institution of China National Petroleum Corp, the country's biggest oil producer. Meanwhile, throughout the world in 2011, the value of merger and acquisitions slumped by 30 percent year-on-year, coming in at $150 billion.
Shale gas, oil sands and other unconventional oil and gas assets as well as deepwater projects were involved in about 70 percent of Chinese oil companies' overseas merger-and-acquisition transactions, said Wu Mouyuan, a researcher with the petroleum company's research arm.
In the past five years, Chinese companies made $230 billion in mergers and acquisitions, more than half of which had to do with natural resources, said Liu Erh-fei, managing director for Bank of America Merrill Lynch's China region.
The market for overseas investments is now a buyer's market, Liu said, adding that he expects Chinese companies will continue to make investments at a faster and faster pace.
The National Development and Reform Commission, the country's top economic planner, approved at least seven overseas projects in February.
Fu Chengyu, chairman of China Petrochemical Corp, or Sinopec, Asia's biggest refiner, said that trade protectionism became more common in developed countries after the recent financial crisis broke out.
As industrialization continues, concerns about energy are expected to bear down not only on the Chinese but also all people over the next 30 to 50 years. More cooperation will be needed throughout the world, Fu said, adding that industrialized countries don't always work together well.
"No one single country can solve its energy issues alone," he said.
He also forecast that international oil prices will climb above $150 a barrel this year, without giving reasons for the prediction.
But Zhang and other forum participants, including Bill Richardson, former US secretary of energy, predicted the price will stay below $150.
Political tensions and the demand for oil amid a world economic recovery will be the two biggest influences on oil prices in the near future, Zhang said. He said he expects the price of crude oil to be below $130 a barrel this year.