The latest buzz surrounding an overseas China energy deal, in this case involving Sinopec’s (HKEx: 386; NYSE: SNP) bid for a South American asset, casts a spotlight on a range of market factors that could come together to make 2012 a big year for overseas resource M&A by Chinese firms. According to foreign media reports, Sinopec, China’s largest refiner which would also like to become a major crude oil producer, is the leading candidate to buy some of Brazil’s most promising offshore oil assets from Britain’s BG Group (London: BG) (English article) This deal would be the latest in a recent string of overseas M&A deals by China’s energy majors, with oil companies CNOOC (HKEx: 883; NYSE: CEO) and Sinopec, as well as coal miners Shenhua (HKEx: 1088; Shanghai: 601088) and Yanzhou Coal (Shanghai: 600188; HKEx: 1171; NYSE: YZC), all bidding for global assets or announcing big deals in the last 6 months. This latest Sinopec deal throws a spotlight on why China could well become the dominant force in bidding for global M&A natural resource assets next year for a number of reasons. From an experience standpoint, China’s resource majors are becoming much better at such M&A following their latest successful acquisitions, after many of their earlier deals failed due to lack of experience. From a financing standpoint, all the resource firms are also in good position as Beijing has stated on many occasions it wants to make the country less dependent on foreign suppliers for key resources like oil, coal and iron ore, meaning Beijing is likely to approve and even provide low-cost financing for these kinds of deals. Lastly there’s the ongoing European debt crisis, which is being felt to a lesser extent in the US, and will restrict the ability of big Western resource companies to assemble the financing necessary for such deals. Since many emerging market players also depend on these credit markets to raise financing for big deals, they will also be affected by the pinch, unlike Chinese firms whose financing usually comes from cash-rich Chinese banks that lend based on Beijing’s latest policy directives. The risk for the Chinese companies, of course, is that they are likely to overpay for these assets in their effort to execute Beijing’s wishes, which could hurt the bottom lines of their listed units. But considering the weak position of many rival bidders, the Chinese firms may actually be able to pick up some of these assets at reasonable prices.
Bottom line: Front-runner status of Sinopec in the race to buy a prime Brazilian oil asset spotlights weakness in global rivals that will make China the leading buyer of global resource assets in 2012.
Related postings 相关文章:
◙ CNOOC’s Latest M&A: A Shaky Oil Sand Castle 中海油收购加国油砂生产商或招来更多麻烦
◙ Yanzhou Joins China Outbound Coal Train 兖州煤业加入中国海外煤炭并购大军
◙ Watch Out China Energy Majors, Here Comes India 能源公司注意：印度来了
The days when China’s big state-owned energy firms could do whatever they wanted without regard for the environment may be in the past, as reflected by a new setback for Sinopec (HKEx: 386; NYSE: SNP), China’s top oil refiner. China’s environmental protection agency, exercising its newfound authority following a new call to protect the environment, has officially ordered Sinopec to halt work on a 2 billion yuan pipeline it was building in the southern city of Zhanjiang, citing lack of a sufficient environmental protection plan. (
Just months after losing its top executive to a rival in one of the period shuffles at the top of China’s major state-run industries, CNOOC (HKEx: 883; NYSE: CEO) is replacing its CEO after two major setbacks that have proven not only embarrassing but also hurt the company’s bottom line. The shuffle, which will see executive director Li Fanrong take over from Yang Hua (
It’s quite a slow news day as we head into the final days of summer before the new school year begins, so I thought I’d dust off my “China Makes Up Its Mind” column with a discussion of much-needed reform of China’s penality system for companies that break the law. Not surprisingly, the calls for reform, while still somewhat muted, are coming in response to violations by a foreign company, in this case US oil giant ConocoPhillips (NYSE: COP), whose leaking oil wells are causing potentially devastating damage in the Bohai Bay off the coast of Shandong province. Under the current system, ConocoPhillips will face maximum fine of 200,000 yuan, or a mere $31,000, for this environmental nightmare that has caused much more damage to the environment and people’s livelihoods. (
CNOOC’s (HKEx: 883; NYSE: CEO) $2.1 billion gamble on a bankrupt oil sands business in Canada rings of a recent Chinese M&A refrain, which has seen Chinese companies across all sectors swoop in and grab struggling overseas assets for what look like bargain prices but end up becoming major headaches. In this case, CNOOC’s purchase of OPTI Canada certainly looks good on paper. (
