Oil industry report says government could tap foreign reserves for overseas acquisitions
Eric Ng 17 February 2009
The central government is considering tapping the country’s huge foreign-exchange reserves to set up a fund to help domestic oil companies acquire overseas resources, according to China National Petroleum Corp.
Beijing may allocate a “certain proportion” of the reserves for the purpose, a report by the country’s largest oil and gas producer said through its mouthpiece, the China Oil News.
The report quoted policy content from a national energy work meeting, attended by top energy officials in Beijing early this month, which touched on industry development from this year to 2012.
“In the next three years, [the government] will encourage companies to develop and acquire resources abroad, [by] giving them interest-rate subsidies, preferential loans and higher state fund injections to key overseas energy projects,” it said.
Analysts said the proposal was unlikely to make a big difference, since money was not a key hurdle.
“As oil is a commodity with considerable national strategic value, it is not something that can be bought easily,” said Guotai Junan Securities analyst Grace Liu Gu.
“I have reservations that mainland companies will necessarily be more successful in buying significant reserves or stakes in overseas companies, although this would be a positive if realised.”
Shenyin Wanguo Securities analyst Yu Chunmei said there appeared to be a trend of “resource nationalisation” in oil-rich nations, where considerable exchange of political favours was required for deals to be done.
Mainland resource companies have faced political opposition in their overseas acquisition attempts.
Dominant offshore oil and gas producer CNOOC was forced to withdraw its US$18.5 billion acquisition bid for United States-based Unocal in 2005, amid rival offers from Chevron and strong opposition from some US politicians, who cited national energy security concerns.
A US$19.5 billion bid by Aluminum Corp of China, parent of listed Chalco, for stakes in metals mining major Rio Tinto Group and its prime assets also faces growing challenges from Rio’s minority shareholders and Australian politicians.
The report said Beijing planned to cut or exempt resource taxes on difficult or expensive-to-develop reserves of domestic oil companies to encourage exploitation.
The government also planned to push development of renewable energy projects by simplifying approval procedures and expanding financing by way of bond sales and stock market listings, it said.
Separately, the report said Beijing had set a national production target of 192 million tonnes of crude oil this year, 196 million tonnes next year and 198 million tonnes in 2011. Natural gas output targets for the same period are 86 billion cubic metres, 105 billion and 120 billion, respectively.
Analysts said the targets were in line with the annual oil output growth of 1 to 2 per cent and gas production growth of 15 to 20 per cent seen in the past few years.
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Beijing may set up fund to buy resources
Oil industry report says government could tap foreign reserves for overseas acquisitions
Eric Ng
17 February 2009
The central government is considering tapping the country’s huge foreign-exchange reserves to set up a fund to help domestic oil companies acquire overseas resources, according to China National Petroleum Corp.
Beijing may allocate a “certain proportion” of the reserves for the purpose, a report by the country’s largest oil and gas producer said through its mouthpiece, the China Oil News.
The report quoted policy content from a national energy work meeting, attended by top energy officials in Beijing early this month, which touched on industry development from this year to 2012.
“In the next three years, [the government] will encourage companies to develop and acquire resources abroad, [by] giving them interest-rate subsidies, preferential loans and higher state fund injections to key overseas energy projects,” it said.
Analysts said the proposal was unlikely to make a big difference, since money was not a key hurdle.
“As oil is a commodity with considerable national strategic value, it is not something that can be bought easily,” said Guotai Junan Securities analyst Grace Liu Gu.
“I have reservations that mainland companies will necessarily be more successful in buying significant reserves or stakes in overseas companies, although this would be a positive if realised.”
Shenyin Wanguo Securities analyst Yu Chunmei said there appeared to be a trend of “resource nationalisation” in oil-rich nations, where considerable exchange of political favours was required for deals to be done.
Mainland resource companies have faced political opposition in their overseas acquisition attempts.
Dominant offshore oil and gas producer CNOOC was forced to withdraw its US$18.5 billion acquisition bid for United States-based Unocal in 2005, amid rival offers from Chevron and strong opposition from some US politicians, who cited national energy security concerns.
A US$19.5 billion bid by Aluminum Corp of China, parent of listed Chalco, for stakes in metals mining major Rio Tinto Group and its prime assets also faces growing challenges from Rio’s minority shareholders and Australian politicians.
The report said Beijing planned to cut or exempt resource taxes on difficult or expensive-to-develop reserves of domestic oil companies to encourage exploitation.
The government also planned to push development of renewable energy projects by simplifying approval procedures and expanding financing by way of bond sales and stock market listings, it said.
Separately, the report said Beijing had set a national production target of 192 million tonnes of crude oil this year, 196 million tonnes next year and 198 million tonnes in 2011. Natural gas output targets for the same period are 86 billion cubic metres, 105 billion and 120 billion, respectively.
Analysts said the targets were in line with the annual oil output growth of 1 to 2 per cent and gas production growth of 15 to 20 per cent seen in the past few years.
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